Goldman Sachs analysts found a very similar trend between the world’s most valuable virtual currency and base metals, which are considered the global economy’s barometers. Against the backdrop of the ongoing coronavirus pandemic, Bitcoin and copper prices have been hitting record highs for most of the year.
Bitcoin Price Hit All-Time High This Year
Goldman Sachs says institutional investors and wealthy individuals alike are shunning cryptocurrencies because of transparency issues. Speculative retail investment, on the other hand, forces Bitcoin to act as an asset hence too risky.
Sachs added that the depth of Bitcoin gains’ initial blockade is very close to copper, a leading global growth indicator. The price of Bitcoin has risen sharply. The volatile cryptocurrency, which reminds many market participants of a similar rally in 2017, jumped above $ 20,000 for the first time in its history on Wednesday.
According to data from a crypto market data provider, Coin Metrics, the Bitcoin broke through $ 23,000 before reporting a gain of around $ 22,899 on Friday. In mid-March, bitcoin was trading below $5000 as the first wave of the Covid-19 pandemic hit.
Bitcoin’s increasing popularity has made it a widespread asset, similar to fiat currency.
Copper Prices Also on the Rise
Meanwhile, copper prices hit $ 8,000 per tonne on Friday, the highest level since February 2013. Quarterly copper prices on the London Metal Exchange have been declining, trading at $ 7,991 during midday trading.
The commodity has grown by over 28% so far, the fourth positive year out of five years.
The 2020 Copper Bull Run coincides with a rally among other stocks and risk assets over the past few weeks, with market sentiment improving amid positive news about the Covid-19 vaccine. Copper has a reputation as a barometer of the world economy among market observers. Base metals are accounted for in this way for their multiple ends uses – both in construction and in consumer products such as automobiles and household appliances.
Earlier this month, Goldman Sachs said it was very likely that copper prices would test a record high of $ 10,170 set in 2011 in the first half of 2022.
Bitcoin is the Retail Reflation Trade
Goldman Sachs analysts have identified a mirror rally of bitcoin and copper in recent months and believe that bitcoin and gold can coexist. The US investment bank said that gold’s recent underperformance against real interest rates and the dollar has made some investors worry that Bitcoin is replacing gold as a preferred hedge against inflation.
The bank added that despite the occurring substitutions, the bank doesn’t see Bitcoin’s increasing popularity as an existent threat to gold’s status as the currency of last resort. In the bank’s opinion, Bitcoin is a retail business, while gold is a protected asset where real capital is long term.