“BTC is The Stimulus Asset” Not Gold, says the Long-Time Gold Bull, Jeffrey Gundlach
While flows into gold ETF holdings are flatlining, Bitcoin continues to capture the attention and funds, with the world’s largest asset manager BlackRock with $8.68 trillion in AUM also dabbling in it.
The price of Bitcoin has gone past $52,500 on Coinbase, while in its price discovery, up 75.70% YTD.
The leading digital currency is enjoying gains despite the dollar holding its ground on the back of upbeat data bolstering the expectations that the US would recover from the coronavirus pandemic faster than its peers.
Government stimulus is helping retail take part in ongoing momentum with another boost to come from President Joe Biden’s $1.9 trillion COVID-19 relief package.
The Federal Reserve has already committed their full support with the minutes from their policy meeting last month, further reinforcing the central bank’s willingness to be ultra-accommodative.
While the dollar is on the rise, for now, many analysts expect it to decline this year, weighed by the central bank’s relentless money printing.
As we reported, this boost to the dollar was given by treasury yields which rose to their highest levels in a year.
“Rising U.S. yields have stopped the dollar from declining for now,” said Osamu Takashima, the Tokyo-based head of G10 FX strategy at Citigroup Global Markets Japan.
“In the longer term, we remain bearish on the U.S. dollar: we expect a risk-on environment globally, and under such circumstances, we think downward pressure on the U.S. dollar could revive.”
Unlike Bitcoin, dollar, and S&P 500, the latter up only 4.67% YTD nowhere near leading digital currency’s performance this year, gold is not doing well at all.
The yellow metal is down 6.11% so far in 2021. This has Bond king and long-time gold bull Jeffrey Gundlach also feeling the attraction of Bitcoin. Gundlach, DoubleLine Capital LP chief, noted,
“I am a long-term dollar bear and gold bull but have been neutral on both for over six months. Lots of liquid poured into a funnel creates a torrent. Bitcoin maybe The Stimulus Asset. Doesn’t look like gold is.”
Earlier this year, Gundlach said Bitcoin appears to be in a bubble. At the time, BTC was trading between $30k to $40k.
The same can be seen in the flows into the biggest gold ETF, which is flatlining while the world's leading digital asset manager, Grayscale, continues to add more BTC.
Just this week, Rick Rieder, the CIO of the world’s largest asset manager BlackRock with $8.68 trillion in AUM, said they have already started working with Bitcoin.
“Today, the volatility of it is extraordinary, but listen, people are looking for storehouses of value,” Rieder said on CNBC’s “Squawk Box.”
“People are looking for places that could appreciate under the assumption that inflation moves higher and that debts are building, so we’ve started to dabble a bit into it.”
Unlike the last few times when Rieder had some bearish calls for BTC, which was before their fund was allowed to buy Bitcoin by the SEC, he was all positive, saying the technology and regulation have evolved to the point, “where a number of people find it should be part of the portfolio, so that’s what’s driving the price up.”
As for making it part of an investment portfolio, the how-much depends on what the rest of it looks like, and BlackRock has been “a lot more cash than we’ve held historically,” he said.
“It’s because duration doesn’t work, interest rates don’t work as a hedge and so diversifying into other assets makes some sense,” and holding some of the cash portions into crypto makes sense as well, said Rieder.