What BTC price slump? Bitcoin outperforms stocks and gold for 3rd year in a row

Bitcoin
(BTC)
may
be
down
over
30%
from
its
record
high
of
$69,000,
but
it
has
emerged
as
one
of
the
best-performing
financial
assets
in
2021.
BTC
has
bested
the
United
States
benchmark
index
the
S&P
500
and
gold.

Arcane
Research

noted
 in
its
new
report that
Bitcoin’s
year-to-date
performance
came
out
to
be
nearly
73%.
In
comparison,
the
S&P
500
index
surged
28%,
and
gold
dropped
by
7%
in
the
same
period,
which
marks
the
third
consecutive
year
that
Bitcoin
has
outperformed
the
two.


Bitcoin
vs.
S&P
500
vs.
gold
in
2021.
Source:
Arcane
Research,
TradingView

At
the
core
of
Bitcoin’s
extremely
bullish
performance
was

higher
inflation
.
The
U.S.
consumer
price
index
(CPI)

logged
its
largest
12-month
increase

in
four
decades
this
November.

“Most
economists
didn’t
see
the
high
inflation
coming,
as
witnessed
by
the
1-year
ahead
consumer
inflation
expectations,”
the
Arcane
report
read,
adding:

“With
its
73%
gain
in
the
highly
inflationary
2021,
Bitcoin
has
proven
itself
to be
an
excellent
inflation
hedge.”


Inflation
2021:
Actual
CPI
vs.
Expected
CPI.
Source:
BLS,
New
York
Fed

Bitcoin
holdings
grew
among
institutional
investment
vehicles

Loose
monetary
policies
and
a
sustained
fear
of
higher
inflation
also
prompted
mainstream
financial
houses
to
launch

crypto-enabled
investment
vehicles

for
their
rich
clients
in
2021.

Arcane
reported
an
inflow
of
140,000
BTC
(~$6.56
billion)
across
spot-
and
future-based
Bitcoin
exchange-traded
funds
(ETF)
and
physically
backed
exchange-traded
products
this
year.


Bitcoin
exchange-traded
fund
holdings.
Source:
ByteTree,
Arcane
Research

That
prompted
more
Bitcoin
units
to
get
absorbed
into
investment
vehicles,
underscoring
a
greater
institutional
demand
for
the
cryptocurrency.

In
contrast,
gold-backed
ETFs
witnessed
an
outflow
of
$8.8
billion
in
2021,
according
to
the
World
Gold
Council’s

report

published
this
December.


Global
gold-backed
ETF
flows.
Source:
World
Gold
Council

Volatility
behind
superior
performance?

Nonetheless,
Bitcoin’s
relatively
superior
performance
in
2021
has
included
periods
of
high
volatility.

Many
analysts
believe
that
extreme
price
fluctuations
keep
Bitcoin
from
becoming
an
ideal
inflation
hedge.
That
includes
Leonard
Kostovetsky,
a
finance
professor
at Boston
College,
who

recalled
 in
his
blog
post that
there
have
been
13
days
in
2021
when BTC’s
price
has
moved
over
10%

in
one
direction.
He
wrote:

“It
seems
strange
to
think
that
a
person
who
is
worried
about
holding
dollars
because
they
lost
7%
of
their
value
over
the
last
year
would
be
comfortable
holding
Bitcoin
which
could
(and
often
does)
lose
that
much
value
in
a
single
day.”

Arcane,
too,
recognized
Bitcoin
for
having
been more
volatile
than
the
S&P
500

in
2021,
noting
that
the
cryptocurrency
“behaved
like
a
risk-on
asset”
by
merely
amplifying
the
most
significant
stock
market
movements.

The
researcher
cited

VIX
, a
measure
of
the
expectation
of
volatility
based
on
S&P
500
index
options,
to
exemplify
the
relationship
between
Bitcoin
and
stock
markets.
It
noted
that
BTC’s
price
fell
hard
whenever
VIX
readings
spiked
in
recent
times,
underscoring
that

institutional
traders
viewed
Bitcoin
as
a
risk-on
asset
.


Bitcoin
vs.
VIX.
Source:
Arcane
Research,
TradingView

As
a
result,
Bitcoin’s

potential
to
fall
harder

in
the
wake
of
a
stock
market
correction
also
became
higher.
Arcane
also
noted
that
a
bearish
2022
for
the
S&P
500
may
end
up
wiping
a
big
portion
of
Bitcoin’s
gains.

“Therefore,
be
aware
of
stock
market
headwinds
in
the
next
year
and
their
possible implications
for
bitcoin’s
short-term
price
trajectory,”
it
added.



Related: Arcane
Research
releases
its
crypto
predictions
for
2022

But
Aristides
Capital
managing
member
Chris
Brown
went
far
in
predicting
an
all-and-all

Bitcoin
doom
in
2022
.
He
stated
that
cryptocurrencies
could
face
massive
selloffs
ahead
as
the
U.S.
Federal
Reserve

ends
its
$120-billion-a-month
asset-purchasing
program

followed
by
three
rate
hikes
next
year.


BTC/USD
weekly
price
chart
vs.
Federal
Reserve
balance
sheet.
Source:
TradingView 

“If
the
Fed
really
does
hike
rates
enough
to
make
money
considerably
less
loose,
or
if
markets
believe
they
will,
you
are
going
to
see
certain
areas
of
speculation
come
to
a
screeching
halt,”
Brown
said,
adding:

“The
prime
example
of
such
asset
speculation
is
cryptocurrency;
here
lies
$2.64
trillion
of
‘wealth’
that
is
backed
by
nothing
and
generates
no
cash
flows.”

The
views
and
opinions
expressed
here
are
solely
those
of
the
author
and
do
not
necessarily
reflect
the
views
of
Cointelegraph.com.
Every
investment
and
trading
move
involves
risk,
you
should
conduct
your
own
research
when
making
a
decision.

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