Bitcoin and Gold have experienced robust rallies in recent weeks due to concerns of impending recessions. Will Bitcoin maintain its outperformance in 2024?
As 2023 draws to a close, Wall Street indices have maintained their significant strength; nevertheless, recessionary sentiment persists into 2024, as evidenced by the gold price’s ascent to $2,100 per ounce.
In contrast, Bitcoin maintains its impressive ascent, surpassing the $40,000 threshold.
Anticipated Recession in 2024
Jamie Dimon, JPMorgan Chase CEO, issued a warning last week about the prospect of additional inflation and did not rule out the possibility of a recession.
However, at the 2023 New York Times DealBook Summit, Dimon conveyed apprehension regarding various inflationary elements and advised attendees to be well-prepared.
An increase in interest rates, which he cautioned against, might serve as a contributing factor to an economic recession.
Dimon underscored the worldwide imperative for augmented financial resources to bolster endeavors such as remilitarization, supporting the green economy, and tackling energy crises.
Nevertheless, he cautioned that these actions could further contribute to inflationary pressures.
In recent weeks, gold and other commodities have experienced substantial gains due to ongoing inflationary concerns.
Mike McGlone, senior commodity strategist at Bloomberg, predicts that gold will likely outperform all other commodities.
Since the turn of the millennium, gold has demonstrated a superior performance compared to most commodities, according to McGlone.
The recent material cost increase could have rejuvenated the long-standing trend that favored the metal.
On the contrary, as the end of 2023 draws near, spot commodity prices are decreasing after attaining the most prolonged levels compared to gold since 2008.
Bitcoin vs Gold
Amidst the current environment of high interest rates, Bitcoin has demonstrated a robust recovery in 2023.
Bitcoin’s price has risen 150% year to date, surpassing $40,000.
Conversely, gold has generated 16% returns since the start of the year, indicating a distinct discrepancy in which Bitcoin has once again outperformed.
The more significant inquiry is whether this outperformance will persist through 2024 or even if a recession ensues.
Gold is widely recognized as a significant recession hedge, whereas Bitcoin has behaved more like a risk-on asset.
A well-known Bitcoin critic, Peter Schiff, writes: “Gold trading above $2,100 tonight, for the first time in history, is far more significant than @Bitcoin trading above $40K. Gold has completely broken out. It’s in uncharted territory, while Bitcoin still needs to rally more than 60% from here just to make a new high”.
Blockstream CEO Adam Back predicted that the value of digital gold, represented by Bitcoin, would eventually exceed that of physical gold, possibly within the current halving cycle, which spans approximately four years
Adam Back, at the moment, estimates that this transition would require approximately $700,000 per Bitcoin to transpire.
According to him, Bitcoin could partially replace gold, with some investors abandoning gold holdings in favor of Bitcoin, which could result in market cap crossovers.
Furthermore, he anticipates substantial capital inflows into Bitcoin during the transition of wealth from baby boomers to the succeeding generations (Generation X and millennials), necessitating the sale of assets such as pension funds, equities, and bonds to acquire Bitcoin.
Bitcoin as an Antidote to Inflation
Brian Armstrong, the chief executive officer of Coinbase, views Bitcoin as a means to advance Western civilization.
Due to the possibility of inflation in the United States, he believes individuals may turn to cryptocurrencies as a natural check and balance.
Armstrong proposes a coexistence of crypto and fiat, wherein stablecoins such as USDC are a substantial bridge between the two realms.
He considers this transition advantageous for the long-term interests of the United States and a complement to the dollar.
Armstrong continues to contemplate the concept and is interested in hearing various viewpoints on the subject.
