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According to Goldman Sachs, bitcoin's (btc) price appreciation in 2024 failed to offset its price volatility risks. Meanwhile, gold's higher risk-adjusted returns reaffirmed its “safe haven” narrative.
Despite Gains, bitcoin Fails to Eclipse Gold
The leading digital asset by reported market capitalization rose from approximately $42,000 at the beginning of the year to $73,000 in March 2024, posting gains of over 73%. At its current market price of $62,790, btc is still more than 40% above its price in January 2024.
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In particular, throughout 2024, bitcoin has consistently outperformed major stock indices, fixed income instruments, gold, and crude oil.
However, according to data tracked by Goldman Sachs, despite btc's impressive gains, its price performance in absolute terms fails to offset its volatility.
Goldman Sachs analysis puts btc's year-to-date (YTD) volatility rate at just under 2%. In comparison, gold returned a risk-adjusted return of 3%, posting strong gains of 28% in absolute terms.
For the uninitiated, the volatility index measures the return an asset generates for each unit of risk or volatility it carries. A higher ratio indicates that an asset provides better returns relative to the risk taken, while a lower ratio suggests less efficient performance.
The analysis notes that bitcoin's volatility index was only better than ethereum's native eth token, the S&P GSCI energy index, and Japan's TOPIX index among investments sensitive to non-fixed income growth.
bitcoin's low volatility index compared to gold cements the latter's claim as a “safe haven asset.” This came into focus last week when btc collapsedand gold rose after Iran's offensive against Israel.
There is still a long way to go for bitcoin
Since its inception following the 2008 financial crisis, bitcoin's rise to a trillion-dollar market cap asset has been remarkable.
The fixed supply of 21 million, decentralized network architecture, and halving every four years make btc an attractive asset. However, the market cap gap between bitcoin and gold remains huge.
That said, several crypto analysts are confident that bitcoin will outperform the shiny metal in the coming years. For example, the experienced analyst Peter Brandt recently made an ambitious prediction that by 2025, btc could see its price increase by 400% relative to gold.
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Similarly, in August 2024, VanEck CEO Jan van Eck fixed that btc could rise to $350,000 thanks to increased adoption.
More recently, investment management company BlackRock declared bitcoin is an “alternative to gold” due to its fixed supply and investors' growing confidence in its ability to cope with inflation and prevent value erosion in times of uncertainty.
On the contrary, billionaire Ray Dalio has expressed his opinion on the bitcoin versus gold narrative. saying that btc will never completely replace gold. btc is trading at $62,790 at press time, down 2.3% in the last 24 hours.
Featured image from Unsplash, charts from ingoldwetrust.report and Tradingview.com
