Bitcoin and gold to outperform commodities by 10 times in 10 years

• Bloomberg strategist Mike McGlone said he sees an end to Fed rate hikes by the end of the year and thus a rally in Bitcoin.
• He adds that Bitcoin and crypto will outperform other commodities in the coming year.

Commodity asset classes such as Bitcoin and gold have been in decline throughout this year. However, these two asset classes could outperform all other commodities over the next decade, says Bloomberg Intelligence senior commodities strategist Mike McGlone.

Mr. McGlone added that the end of the Fed’s aggressive monetary tightening is in sight. Last week, the US Federal Reserve announced a 75 basis point increase in interest rates for the third time in a row. According to reports, the federal funds rate could go as high as 4.3 percent by the end of 2022 and also 4.6 percent in early 2023. Therefore, analysts expect a 75 basis point increase by November and a further 50 basis point increase in December. Speaking on the matter, Bloomberg Senior Commodity Strategist Mike McGlone said:

The most central banks in history are going[d]prices with the world teetering on recession. Lower commodity and risk asset prices may be the only way out with deflationary implications, which should bolster the price of gold and its digital version, Bitcoin.

But Mr. McGlone is confident that once the Fed’s tightening cycle ends, Bitcoin and crypto will soon resume a bullish trend after this major decline. He added:

It’s been a bad decade for commodities and an exceptionally good one for Bitcoin, and 2022 could see the cure of higher prices stronger than ever, favoring crypto. With Federal Reserve tightening nearing an endgame, risk vs. reward tilt towards resuming the enduring upward trajectory in Bitcoin, especially relative to most commodities.

Bitcoin and Commodities

Interestingly, both Bitcoin and commodities have moved in opposite directions so far in 2022. Commodity prices shot up with Russia’s invasion of Ukraine. On the other hand, Bitcoin and the broader crypto sector suffered heavy losses. Bitcoin is already trading at a 70 percent discount from its record high of $69,000 last November.

But McGlone believes Bitcoin and crypto will gather steam going forward and commodities will give up gains. The analyst added that the Fed’s aggressive monetary policy tightening and the supply-demand cycle will weigh on commodities. He added:

The lowest crypto volatility ever vs. The Bloomberg Commodity Index (BCOM) may herald a resumption of Bitcoin’s propensity to outperform. What is unique to commodities is the 260-day volatility of the crypto falling to new lows. If history is any guide, Bitcoin volatility is more likely to recover compared to commodities as the crypto moves towards new highs.

The Bloomberg analyst is confident that Bitcoin will outperform in the long term to become a “high-beta alternative to gold and US Treasuries”. “Bitcoin-to-gold ratio of about 10x, which was first reached in 2017. In a world that is rapidly going digital, the benchmark crypto is a top competitor to ancient gold,” he said.