Commentary from Singapore’s DBS Bank on BTC and gold – says the crypto is unlikely to replace gold in portfolios as a risk diversifier.
(ps. the note is from late last week)
- Due to its erratic trading pattern and short history, Bitcoin’s correlation to key macro indicators are untested.
- It is hence challenging to track the fundamental value of Bitcoin.
- Value is only determined by supply and demand, out of which demand is currently pure speculative.
- Although gold prices are also determined by demand and supply, the relationship with macro variables has been established.
“We continue to recommend gold as a hedge for lower USD, high inflation, negative real rates, and policy uncertainties. Its dual characteristics, both negatively and positively correlated to equities at extreme ends of equity performance, diversifying and appreciating at the same time makes it a perfect hedge.”
- “Our base case looks for more stimulus, USD depreciation, and flattish yields as a result of the quantitative easing (QE) expansion, all of which will continue to lend good support for gold.”