What BTC price slump? Bitcoin outperforms stocks and gold for 3rd year in a row – Cointelegraph

Bitcoin (BTC) may be down over 30% from its record high of $69,000, but it has emerged as one of the best-performing financial assets in 2021. BTC has bested the United States benchmark index the S&P 500 and gold.

Arcane Research notedin its new reportthat Bitcoins year-to-date performance came out to be nearly 73%. In comparison, the S&P 500 index surged 28%, and gold dropped by 7% in the same period, which marks the third consecutive year that Bitcoin has outperformed the two.

At the core of Bitcoins extremely bullish performance was higher inflation. The U.S. consumer price index (CPI) logged its largest 12-month increase in four decades this November.

Most economists didnt see the high inflation coming, as witnessed by the 1-year ahead consumer inflation expectations, the Arcane report read, adding:

Loose monetary policies and a sustained fear of higher inflation also prompted mainstream financial houses to launch crypto-enabled investment vehicles for their rich clients in 2021.

Arcane reported an inflow of 140,000 BTC (~$6.56 billion) across spot- and future-based Bitcoin exchange-traded funds (ETF) and physically backed exchange-traded products this year.

That prompted more Bitcoin units to get absorbed into investment vehicles, underscoring a greater institutional demand for the cryptocurrency.

In contrast, gold-backed ETFs witnessed an outflow of $8.8 billion in 2021, according to the World Gold Councils report published this December.

Nonetheless, Bitcoins relatively superior performance in 2021 has included periods of high volatility.

Many analysts believe that extreme price fluctuations keep Bitcoin from becoming an ideal inflation hedge. That includes Leonard Kostovetsky, a finance professor atBoston College, who recalledin his blog postthat there have been 13 days in 2021 whenBTCs price has moved over 10% in one direction. He wrote:

Arcane, too, recognized Bitcoin for having beenmore volatile than the S&P 500 in 2021, noting that the cryptocurrency behaved like a risk-on asset by merely amplifying the most significant stock market movements.

The researcher cited VIX,a measure of the expectation of volatility based on S&P 500 index options, to exemplify the relationship between Bitcoin and stock markets. It noted that BTCs price fell hard whenever VIX readings spiked in recent times, underscoring that institutional traders viewed Bitcoin as a risk-on asset.

As a result, Bitcoins potential to fall harder in the wake of a stock market correction also became higher. Arcane also noted that a bearish 2022 for the S&P 500 may end up wiping a big portion of Bitcoins gains.

Therefore, be aware of stock market headwinds in the next year and their possibleimplications for bitcoins short-term price trajectory, it added.

Related:Arcane Research releases its crypto predictions for 2022

But Aristides Capital managing member Chris Brown went far in predicting an all-and-all Bitcoin doom in 2022. He stated that cryptocurrencies could face massive selloffs ahead as the U.S. Federal Reserve ends its $120-billion-a-month asset-purchasing program followed by three rate hikes next year.

If the Fed really does hike rates enough to make money considerably less loose, or if markets believe they will, you are going to see certain areas of speculation come to a screeching halt, Brown said, adding:

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

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What BTC price slump? Bitcoin outperforms stocks and gold for 3rd year in a row - Cointelegraph