What happened: Hours after breaching $50,000, Bitcoin (BTC) added another $1,000 to its price to reach a new all-time high of $51,163.
— Holger Zschaepitz (@Schuldensuehner) February 17, 2021
At the same time, gold dropped below $1,800, and the gold-bitcoin ratio hit an all-time low.
Why it Matters: The two assets have often been compared to one another, with both Bitcoin and gold serving as an inflation hedging asset class.
The U.S market witnessed considerable amounts of reflation trade over the past few weeks met with rising bond yields leading investors to assess the impact of a bond sell-off on their assets.
The anticipation of higher inflation likely led to these higher interest rates, but it appears that investors have opted to buy Bitcoin instead of gold in the present scenario.
What else: While both assets have served as a store of value to investors, particularly in times of inflation, Bitcoin outpaces gold in terms of performance and risk-adjusted returns.
According to a data platform Ecoinometrics, Bitcoin’s annual returns at the end of December 2020 were 270% compared to gold’s 24%.
However, the returns over the past eight years stand out even more as Bitcoin’s total return was 202,328%, while gold’s return was around 13%.
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