Friday, June 14, 2024
Market Analysis

Bitcoin underperforms stocks, gold for the first time since 2018

Gold and stocks have underperformed in 2022, but the year has been difficult for Bitcoin (BTC) investors, in particular.

Worst year for Bitcoin since 2018

Bitcoin’s price looks prepared to close 2022 down nearly 70% — its worst year since the crypto crash of 2018.

Bitcoin monthly returns. Source: Coinglass

BTC’s depressive performance can be explained by factors such as the United States Federal Reserve hiking interest rates to curb rising inflationary pressures followed by the collapse of many crypto firms, including Terraform Labs, Celsius Network, Three Arrows Capital, FTX and others.

Some companies had exposure to defunct businesses, typically by holding their native tokens. For instance, Galaxy Digital, a crypto-focused investment firm founded by Mike Novogratz, confirmed a $555 million loss in August due to holding Terra’s native asset, LUNA, which has crashed 99.99% year-to-date (YTD).

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Meta, Tesla stocks mirror Bitcoin in 2022

The above catalysts have prompted Bitcoin to drop 65% year-to-date. 

BTC/USD daily price chart. Source: TradingView

Meanwhile, the U.S. benchmark S&P 500 has plunged nearly 20% YTD to 3,813 points as of Dec. 28. That puts the index on its biggest calendar-year drop since the 2008 economic crisis. The bloodbath has proven to be worse for the tech-heavy Nasdaq Composite, down 35% YTD. 

High-profile losers include Amazon, which has crashed approximately 50% YTD, as well as Tesla and Meta, whose stocks have dropped nearly 72.75% and 65%, respectively. As it looks, tech stocks and Bitcoin have suffered similar losses in 2022.

BTC/USD vs. IXIC, TSLA, META YTD price performance. Source: TradingView

Just as with Bitcoin, the Fed’s rate hikes remain the most-critical factor behind the U.S. stock market’s underperformance. But whether a tighter monetary policy would cause an economic recession in 2023 remains to be seen.

This uncertainty has driven capital toward the U.S. dollar for safety, with the U.S. Dollar Index (DXY), a barometer to gauge the greenback’s health versus top foreign currencies, rising nearly 8.5% YTD. 

DXY daily price chart. Source: TradingView

Gold not such a “safe haven”

Spot gold is up 0.14% YTD to nearly $1,800 an ounce, which makes it a better performer than Bitcoin and the U.S. stock market.

XAU/USD daily price chart. Source: TradingView

Nevertheless, the year has seen gold deviating from its “safe haven” characteristics in the face of a stronger dollar and rising U.S. bond yields.

For instance, the precious metal is down 22% from its 2022 peak of $2,070, though some losses have been pared as the dollar’s uptrend lost momentum in the second half of 2022.

Bitcoin still winning since March 2020

Bitcoin had gained 1,650% after bottoming out in March 2020 below $4,000, boosted by the Fed’s quantitative easing policy. Even as of Dec. 28, investors who purchased Bitcoin in March 2020 are sitting on 332% profits.

BTC/USD weekly price chart. Source: TradingView

In comparison, U.S. stock market and gold‘s pandemic era-rally was small. 

For instance, the Nasdaq Composite index grew up to 143% after bottoming out at 6,631 points in March 2020. So, investors who may have gained exposure in the Nasdaq stocks during the easing era are sitting atop a maximum of 56% paper profits as of Dec. 28. 

IXIC weekly price chart. Source: TradingView

It‘s the same for gold, which rose a mere 43% during the pandemic era and is now up 26.50% when measured from its March 2020 bottom of around $1,450.

XAU/USD weekly price chart. Source: TradingView

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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