After two years have passed, the price of bitcoin has finally set an all-time high again this week. Not only did it set records, the price of bitcoin also skyrocketed to beat the increase of other assets, both risky assets (stocks) and safe or safe haven assets such as gold.
Quoting from Refinitiv data, on Tuesday (12/1/2020), bitcoin scored the most expensive record in history of US $ 19,929.75 / BTC, surpassing the previous record of US $ 19,458.19 / BTC which was reached in December 2017.
After hitting a record in December 2017, bitcoin’s price has dropped 80% a year later. The high volatility makes this asset considered a high risk, but on the other hand there are those who consider it digital gold, 2 things that are of course opposite.
Despite these contradictions, bitcoin has once again performed brilliantly this year. Compared to the position from the end of last year to the present or year-to-date (YtD), bitcoin rocketed 154.88%, about 6 times the increase in gold, and 8 times the increase in the S&P 500.
indexBoth gold and the S&P index The 500 also set an all-time high this year, but so far this year gold “only” posted a gain of 25.91%, and the S&P 500 “only” gained 17.59%.
The increase in Bitcoin is due to the many institutional investors who have entered to the market
Apart from the corona virus disease pandemic (Covid-19), one of the triggers for the increase in bitcoin this year is the number of institutional investors who have started to enter. This happens because bitcoin is considered to be more mature, and its volatility will decrease.
The entry of institutional investors to bitcoin is good news, because they will tend to hold their positions for quite a long time, so that bitcoin volatility will decrease further.
Looking at the view of bitcoin as digital gold, according to investment bank JP Morgan, investors in gold and bitcoin are different. Bitcoin investors are dominated by millennials, while gold is older.
“Two groups show differences in preferences for ‘alternative’ currencies. The older group chose gold, while the younger group chose bitcoin,” said JP Morgan analyst led by Nikolaos Panigirtzoglou in a note quoted by Kitco, Tuesday (18/8/2020) ).
The preference for gold and bitcoin as an alternative has an impact on the correlation between the two assets to be more positive. This means that they both move in the same direction, when gold strengthens, bitcoin will also go up. According to JP Morgan, this is because millennials in the US see bitcoin as an ‘alternative’ money to the US dollar.
“The simultaneous flow of capital has caused a change in the correlation pattern between bitcoin and other assets, to be more positive between bitcoin and gold, but also between bitcoin and the dollar as millennials in the US see bitcoin as an ‘alternative’ money to the US dollar,” said Panigirtzoglou.
Meanwhile, the results of a survey, deVere Group, an independent financial advisory and fintech company, of more than 700 millennials in various countries, 67% said they chose bitcoin as a safe haven asset rather than gold.
Millennials will be an important key to the future of bitcoin, because based on the results of the DeVere survey, there will be a large transfer of wealth between generations. Based on estimates, the transfer of wealth reaches US $ 60 trillion from baby boomers to millennials.
This means that with millennials choosing bitcoin as a safe haven over gold, when the transfer of wealth occurs, investment in bitcoin is likely to be even greater.