Bitcoin's Underperformance: More Than Just "Zooming Out"
While gold has surged over 80% amid high inflation, geopolitical tensions, and interest rate uncertainty, Bitcoin has dropped 14% year-over-year. This stark divergence has raised serious questions about Bitcoin's role as an inflation hedge and safe-haven asset.
The Core Issue: Why Isn't Bitcoin Performing?
Crypto advocates argue that Bitcoin's current weakness reflects several key factors rather than a collapse in long-term demand:
- Temporary supply overhang from early adopters selling
- Investor "muscle memory" favoring familiar precious metals
- Bitcoin's correlation with risk assets rather than safe havens
What Bitcoin Bulls Are Saying
Comfort in the Known
"Gold's current surge is a temporary political distraction. In times of fear, institutions tend to retreat to what they know because they often lack the foresight to embrace a genuine phase shift in technology." - Jessy Gilger, Gannett Wealth Advisors
Transfer of Ownership, Not Demand Problem
"It is not a demand problem; it is a supply distribution event. Institutional ETF inflows are massive, but they aren't pushing the price up; they are simply absorbing a decade's worth of supply being dumped by early adopters. We are witnessing a transfer of ownership, not a failure of interest." - Mark Connors, Risk Dimensions
Tech Stock Correlation
"Bitcoin is not failing, it is merely retreating in line with internet stocks, which it has always been closely correlated with since it came to be." - Charlie Morris, ByteTree
Delayed Rotation Coming?
"There's a long-standing, mass-market comfort with precious metals that Bitcoin simply hasn't earned yet. I still think we eventually see a delayed rotation into BTC, but for now investors are gravitating toward what they know and trust." - Peter Lane, Jacobi Asset Management
Need Another Demand Driver
"Bitcoin has largely been an inflation hedge for the last half decade, but with deflation likely on the horizon, bitcoin will need to find other demand to continue driving the asset higher." - Anthony Pompliano, ProCap Financial
A Permanent Solution to Inflation
"Bitcoin's fixed supply and network growth keep delivering outsized returns vs. inflation and indeed over gold over a multi-year horizon. Bitcoin is now emerging as the Internet's native monetary asset. It isn't a 'hedge' against inflation - it's a permanent solution to it." - David Parkinson, Musquet
Bitcoin's Time Is Coming
"Think the precious metals rally is ultimately due to something that you could call 'muscle memory' - in times of uncertainty, investors resort to those assets that they are familiar with first. I am pretty confident that bitcoin will start to catch a bid once traditional hard assets have been inflated to obscene levels and capital will start to rotate into more attractively valued assets like bitcoin." - Andre Dragosch, Bitwise
The Bottom Line
Many Bitcoin proponents still see BTC as a superior long-term store of value and "digital gold," predicting that once traditional hard assets are overbought, capital will rotate into Bitcoin, allowing it to "catch up" to gold. Based on the relative Mayer multiple between Bitcoin and gold, Bitcoin is already at FTX blow-up levels last seen in 2022 relative to gold, suggesting significant potential upside.
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