In its roughly 14 years of existence, bitcoin has often drawn comparisons — launched mainly by proponents — to gold. There’s the long-running “digital gold” label, which has often been admonished by gold bugs.
Of course, there are substantial differences between gold and bitcoin, not the least of which being that bullion is something that can be held by the human hand and has a track record which is measured in the thousands of years. However, bitcoin and gold are both considered alternative assets, and the good news for investors is that they don’t necessarily need to choose between the two.
In what could be a positive sign for equity-based plays on bitcoin, including the Invesco Alerian Galaxy Crypto Economy ETF (SATO ) and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC ), Bernstein said in a recent report to clients that it doesn’t make sense to endorse gold while bashing bitcoin.
The research firm noted that an increasingly prominent theme in client conversations is that investors are preparing for an extended period of the U.S. dollar falling out of favor, and they’re tapping gold to prepare for that scenario. That makes sense because commodities, including gold, are denominated in dollars, but bitcoin might merit a place in that conversation, too.
“If you like gold here, you should like bitcoin even more … Gold and bitcoin correlation increases during the periods of crisis. And when there is a massive monetary debasement event, while both bitcoin and gold rally, bitcoin outperforms gold,” according to Bernstein.
There might be something to the dollar debasement thesis, as the largest gold-backed exchange traded fund is higher by more than 9% year-to-date. On the other hand, that’s a far cry from the 80% jump notched by bitcoin. That resurgence is propelling BLKC and SATO; the Invesco ETFs are, as of April 10, up 35% and 73.08%, respectively, year-to-date.
SATO’s outpacing of its stablemate is likely attributable to more exposure to bitcoiners — companies whose share prices are highly correlated to price action in the largest digital currency. BLKC, meanwhile, features some exposure to bitcoin miners as well as significant allocations to traditional financial services companies and large-cap growth stocks.
Either ETF could be a horse worth betting on as bitcoin continues its 2023 ascent. Speaking of horses — “Liking gold, but not liking bitcoin, is like hating on a faster horse,” concluded Bernstein.
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VettaFi LLC (“VettaFi”) is the index provider for BLKC and SATO, for which it receives an index licensing fee. However, BLKC and SATO are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing or trading of BLKC and SATO.
