Crypto, Equity, Metal Markets Plunge as Tech Earnings Disappoint and US Economic Weakness Deepens

January 25, 2023 Bitcoin.com

Sub-$22K Bitcoin looks juicy when compared to gold’s market capitalization

July 18, 2022 Coin Telegraph

Sub-K Bitcoin looks juicy when compared to gold’s market capitalization

Boeing

BTC’s market cap is way smaller than gold's, but the percentage of Bitcoin held by institutional investors suggests that the current pricing reflects an excellent discount.

Bitcoin's (BTC) price is down 56% year-to-date, but the correction was not strong enough to remove the digital asset from the list of top-20 global tradable assets. Bitcoin’s current $400 billion market capitalization stands higher than traditional companies like Exxon Mobil, Walmart and Procter & Gamble, but there’s always the question of whether a direct comparison between a commodity like Bitcoin and equities is valid.

*Most valuable tradable global assets. Source: 8marketcap.com*

Analysts and investors favoring stocks constantly remind crypto advocates that Exxon Mobil posted $25.79 billion in earnings over the past 12 months, as a justifying example of its valuation. But on the flip side, earnings don’t necessarily explain how Boeing booked $16.1 billion losses in two years, even as it holds an $87.1 billion market capitalization.

Measuring a commodity market value can be tricky. For example, in the case of silver, only 50% of precious metal is used in industrial applications. There are individuals and companies holding the asset for investment in the form of bars, coins, or jewelry and these are not "productive" revenue-generating assets.

Bitcoin’s value is vastly inferior to gold’s $11.2 trillion market capitalization, but what does “$400 billion” even mean, and how does it compare to broader asset classes such as global equities, real estate and debt markets?

Was the Bitcoin “digital gold” thesis wrong?

The first question one should ask is: Has gold been a good store of value over the past five years? To find answers, traders have to compare its price against other trillion-dollar asset classes like global equities, oil and real estate. The overall goal for any store of value is to maintain the purchasing power, regardless of price fluctuations during the period.

*Gold vs. WTI oil, S&P500 index, and Case-Shiller Home Price. Source: TradingView*

From July 2017 until July 2022, gold has underperformed the remaining asset classes by 18% or higher. The precious metal broke above $2,000 in August 2020, but it could not keep up with the ever-growing prices of stocks, housing and energy. In comparison, the United States monetary base, bank deposits and cash, expanded by 48.5% in the same period.

One could argue that gold has failed to sustain its purchasing power over time, but it’s likely that more time is needed to evaluate how the precious metal will behave if the current global crisis accelerates or extends longer than expected. Meanwhile, in this same time period, Bitcoin presented 840% gains from July 2017 to July 2022.

Here’s the solution to Bitcoin’s price volatility

There’s a valid question about Bitcoin’s volatility and rightfully so given the fact that the asset regularly faces 20% or higher weekly price moves. But there’s a simple and quick solution to alleviate this oscillation, or at least reduce the impact on a longer time frame. The dollar cost average (DCA) strategy consists of regularly buying pre-set amounts of an asset on a daily, weekly or monthly basis.

*Bitcoin price in USD vs. 5-year moving average. Source: TradingView*

For instance, following this strategy for the past five years would have resulted in a $19,192 average entry cost. So even if the 8.3% gain to the current $20,800 price might not be enough to compete with gold, it certainly shows a more predictable form in which to use Bitcoin as a long-term store of value.

The gold ETF vs. Bitcoin investment products

According to CryptoCompare, the Bitcoin investment vehicles under management (AUM) totaled $15.9 billion in June. This metric includes exchange-traded products such as Grayscale GBTC and exchange-traded notes from multiple providers. This ratio is equivalent to 4% of Bitcoin’s current $400 million market capitalization.

*Total crypto listed investment vehicles, USD billion. Source: CryptoCompare*

In comparison, the gold-backed ETF products stood at $221.7 billion in June, according to data from GoldHub. If one excludes the 50% “non-financial-related use of gold” like jewelry and industry, the remaining market capitalization stands at $5.6 trillion. Therefore, the fund‘s exchange-traded investment vehicles correspond to 4% of the adjusted gold‘s market value.

At $20,800, Bitcoin‘s investment vehicle holdings ratio matches the gold markets. While the $400 million market cap level might concern some investors, the asset’s adoption is minimal compared to the adoption of gold, a precious metal with a 7,000-year history as an investment vehicle.

Considering the fiv-year period that was analyzed and using a simple DCA strategy to rule out sharp price oscillations, gold is currently a better store of value, but that does not invalidate Bitcoin’s 8.3% gain in the period. In short, both assets have yet to prove themselves.

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

Coinbase Blacklists Over 25,000 Crypto Addresses Tied to Russian Individuals and Entities

March 7, 2022 Bitcoin.com

MicroStrategy’s Bitcoin treasury exceeds cash held by 80% of S&P 500 non-financial companies

September 15, 2021 Coin Telegraph

Alphabet

The Nasdaq-listed company recently announced it added another 5,050 Bitcoin to its coffers for about $242.9 million.

The value of MicroStrategy’s massive Bitcoin (BTC) holdings has surpassed what most S&P 500 companies hold in their cash treasuries.

The Nasdaq-listed enterprise software firm purchased an additional 5,050 Bitcoin for about $242.9 million, raising the value of its 114,042 BTC holdings to nearly $5.3 billion. That comes out to be higher than what 80% of non-financial S&P 500 companies hold in their cash coffers, as per data compiled by Bloomberg.

Cash spending up among corporations

MicroStrategy made buying Bitcoin its official corporate strategy in 2020, with its celebrated CEO, Michael Saylor, calling the move a defense against the U.S. dollar’s potential devaluation. Companies like Tesla and Square later copied the strategy to replace a portion of cash reserves with Bitcoin.

On the other hand, firms with lower risk appetites continued to increase their cash holdings. For instance, in the second quarter, non-financial companies on the S&P 500 boosted their treasuries by 12% from a year ago due to escalating uncertainty caused by the COVID-19 pandemic.

*Cash holdings by non-financial S&P 500 companies in recent quarters. Source: Bloomberg*

Some of those firms — including General Electric, Ford and Boeing — started spending the cash during the ongoing third quarter. For instance, in July, non-financial S&P 500 companies slashed their dollar reserves by $30 billion, or 2%, from a year ago.

At the same time, companies like Amazon and Alphabet (Google’s parent company) were still amassing cash but did little to change overall dollar spending. The total cash stockpiles held by United States corporations fell to $1.52 trillion from $1.55 trillion as they acquired new businesses, bought back shares and increased dividends, Bloomberg data reveals.

Overall, the declining cash holding trend shows that publicly traded companies have become more comfortable with spending their money, led by expectations that the COVID-19 pandemic is almost over.

MSTR gives de facto Bitcoin exposure

Shares of MicroStrategy have surged by almost 359% in the past 12 months, in lockstep with Bitcoin, whose value has surged by 314% in the same period.

Since MSTR appreciation has outpaced Bitcoin’s price growth, some analysts believe that owning shares gives investors easier exposure to the benchmark cryptocurrency market through traditional infrastructure.

*MicroStrategy vs. Bitcoin vs. Nasdaq. Source: Ecoinometrics*

“It’s no secret that MSTR is being valued above the NAV [net asset value] of coins currently owned, and I don’t think investors are buying it for the legacy business upside,” said analyst Kingdom Capital.

“The [clearest] reason I can see is it is one of the few companies with a large market capitalization in the BTC space.”

For instance, the Amplify Transformational Data Sharing ETF, which manages $1.2 billion worth of investments, has gained 6.5% exposure in MSTR after snubbing Grayscale Bitcoin Trust, the leading Bitcoin investment vehicle in the U.S. that trades over-the-counter, which restricts it from receiving capital from certain funds and exchange-traded funds.

Similarly, the Siren Nasdaq NexGen Economy ETF has exposure to MSTR but holds no GBTC.

As a result, MicroStrategy stock and Bitcoin prices are expected to trend in sync, unless more crypto stocks become available. Kingdom Capital weighed in:

“There appear to be better vehicles available to investors for BTC equities, and as they become more widely accessible I expect some ETFs will reduce their MSTR exposure.”

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