The race for safe havens appears to be on once more. Will bitcoin recover after languishing for months and be a winner in the rush from U.S. equities? Our own Dave Nadig and Sumit Roy were joined by Nate Geraci, President of NovaDius Wealth management and Host of ETF Prime; Kirsten Chang, Senior Industry Analyst at TMX VettaFi; and Mike Akins, Founding Partner of ETF Action, to discuss precious metal performance and bitcoin on a recent ETF Zoo episode. You can find the episode in its entirety here.
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Geraci: If we have rates coming down, maybe there are concerns over US equity valuations and people want to look for another place to go. Maybe Bitcoin siphons some of that.
Nadig: Well, let’s shift then a little bit and talk about the sort of risk-on-risk-off nature, because that’s the other thing we talk about with bonds. And look, mean, precious metals have just been insane. Right. And this is silver, gold, SPY, and bitcoin. And look, this is not a pretty chart if you’ve been in anything but silver. Let’s just be clear about that.
This to me seems like something that’s imminently shortable. I can’t imagine taking a precious metal up 200% and having that be the new bottom. But hey, I’m not going to make that market call. But we have talked a lot about people making safety trades. We have seen massive flows into the whole precious metals complex.
I think the other real question here is how sustainable is that? I mean, how often does gold run up 75% and rebase there for the next 10 years? Or is this, again, just the people parking cash in a place that’s not U.S. Treasuries anymore? Anybody have any big thoughts on gold and guess in particular silver? Holy cow.
Akins:I think you have to separate gold and silver a little bit. I think there’s an argument to be made – and like the gold council, the world gold council put out a lot of good stuff, the issuers behind the GLD product in terms of the central bank – and the true belief that there is a policy concern there. And I think that’s a true macro tailwind for the space and can be arguably said, if you see the growth of gold on the balance sheets of these central banks, it’s real.
Silver, I think, has got caught up a little bit – almost like, is SLV held in ME yet? Is it in the meme ETF? Because that’s just wild to me. And I think that’s not sustainable. But they’re both elevated in historical terms. It’s pretty crazy.
Like the chart of the year, in my opinion, last year is when GLD, since its inception, overtook SPY and cumulative returns. That was just a crazy concept. Honestly, not a healthy concept for the markets if that’s one way to look at it. It’s not a productive asset.
Nadig: Well, but you can say the same thing about bitcoin. And we’ve been talking about bitcoin being the new digital gold for a long time. And that doesn’t seem to have worked. I mean, you can sort of look at where the flows have been in bitcoin. And I think it’s reasonable to say that the ETF industry has largely held pat and whoever’s selling bitcoin down isn’t doing it in the ETF market.
So like, is it viable to be thinking about bitcoin as the new safety play like gold when we’ve had this 80 percent difference in return between gold and bitcoin?
Roy: Something happened to Bitcoin in October, because up until last October it was acting pretty well. It was up pretty significantly on the year. Then it just fell out of bed and it’s just been languishing at the bottom since then. I don’t know what happened. I know, the crypto people were talking about a big liquidation happened. We’ll see if that turns around, but clearly it is not acting like digital gold right now. Gold is gold.
Nadig: Nate, what are your thoughts on the current state of bitcoin? You follow this probably closer than anybody else on this podcast, probably. You have your whole podcast about crypto.
Geraci: I still feel the same way. I’m a broken record here in that I’ll be the first to say the jury’s still out on whether or not bitcoin is digital gold. It’s still early. And I actually like the way our friend, Bloomberg’s Eric Balchunas, refers to bitcoin, which is as it’s gold as a teenager, right? It’s still volatile. It’s a little immature. It’s not quite sure what to do day in and day out. I think that’s a good way to think about it.
But here’s what I would ask all of you, and let’s think about the overall backdrop here. I think, again, the consensus is shorter term interest rates will potentially come down or continue to come down this year, right? You look at the inflation data, we still have, I would say, relatively or at least somewhat sticky inflation. There are clearly concerns around the U.S.’s fiscal health. We talked about a weaker dollar earlier. There are clearly concerns over U.S. equity valuations. We have ongoing geopolitical tensions.
So start adding all of those up. To me, that seems like a pretty good backdrop, certainly for gold. And then if you want to say bitcoin does have some characteristics of a safe haven asset, then I think you would have to say for bitcoin as well. And even if you don’t believe that, let’s just take bitcoin itself. If we have rates coming down, maybe there are concerns over U.S. equity valuations and people want to look for another place to go. Maybe bitcoin siphons some of that.
Now, if we start getting into other crypto assets, I’ve said many times, I think once you move beyond bitcoin, most of the other crypto assets out there you have to view as risk-on. They’re like high tech, yeah, they’re tech stocks. So I think that’s different. But I do think bitcoin has shown enough in its early life. Remember, it’s only been, what, 16, 17 years now? Which is early in a financial asset.
Gold’s been around for 5,000 plus years. I think it has shown enough to at least indicate that longer term it could become digital gold.
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