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Bitcoin and Gold to outperform commodities by 10x in 10 years

  • Bloomberg strategist Mike McGlone said that he sees an end to the Fed rate hike by the year-end and thus a rally in Bitcoin.
  • He adds that Bitcoin and crypto shall outperform other commodities in the year ahead.

Commodity asset classes like Bitcoin and Gold have been on a decline throughout this year. However, these two asset classes can outperform all other commodities over the next decade, says Bloomberg Intelligence’s senior commodity strategist Mike McGlone.

Mr. McGlone added that the end of the Fed’s aggressive monetary tightening is in sight. Last week, the U.S. Federal Reserve announced a 75 basis points rate hike for the third consecutive time in a row. As per reports, the rate of Federal funds can go as high as 4.3 percent by the end of 2022 and also 4.6 percent by early 2023. Thus, analysts are expecting a 75 basis points hike by November and an additional 50 basis points hike in December. Speaking on the matter, Bloomberg’s senior commodity strategist Mike McGlone said:

The most central banks in history hike[d]rates with the world tilting toward recession. Lower commodity and risk-asset prices may be the only way out with deflationary implications, which should buoy the price of gold and its digital version, Bitcoin.

But Mr. McGlone is confident that as the Fed tightening cycle ends, Bitcoin and crypto would soon resume a bullish trend after this major retracement. He added:

It’s been a bad decade for commodities and an exceptionally good one for Bitcoin, and 2022 may prove the higher-price cure stronger than ever, favoring the crypto. With Federal Reserve tightening nearing an endgame, risk vs. reward may be tilting toward resuming the enduring upward trajectory in Bitcoin, notably vs. most commodities.

 

Bitcoin and commodities

Interestingly, both Bitcoin and commodities have been moving in the opposite direction so far in 2022. The commodity price shot up with Russia’s invasion of Ukraine. On the other hand, Bitcoin and the broader crypto sector suffered major losses. Bitcoin is already trading at a 70 percent discount from its all-time high of $69,000 last November.

But McGlone believes that Bitcoin and crypto will gather steam going forward and commodities will be giving up gains. The analyst added that Fed’s aggressive monetary tightening and the supply-demand cycle will weigh down commodities. He added:

The lowest-ever crypto volatility vs. the Bloomberg Commodity Index (BCOM) may portend a resumption of Bitcoin’s propensity to outperform. What’s unique relative to commodities is 260-day volatility of the crypto dropping to new lows. If history is a guide, Bitcoin volatility is more likely to recover vs. commodities when the crypto heads toward new highs.

The Bloomberg analyst is confident that Bitcoin will outperform in the long term to become a “high-beta version of gold and U.S. Treasury bonds”. “The Bitcoin-to-gold ratio at about 10x, which was first reached in 2017. In a world rapidly going digital, the benchmark crypto is a top competitor to old-guard gold,” he said.

 

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