Bernstein says if you like gold, you should like bitcoin even more

Published Mon, Apr 10 20232:06 PM EDT

It's "irrational" to like gold and dislike bitcoin at this point in the macro cycle, according to Bernstein. While ether has been gaining strength relative to bitcoin ahead of the "Shanghai" upgrade this week , bitcoin has outperformed it and the major stock averages this year. Consider that bitcoin has gained about 75% year to date, according to CoinMetrics, while the S & P 500 has climbed 6.7% in 2023. At the same time, the flagship cryptocurrency's correlation with gold has been climbing, while its correlation with stocks has declined, Bernstein found. Bitcoin fans have long highlighted its potential to act as a sort of digital gold because it's divisible, scarce and doesn't rely on a central issuer. They also once argued that bitcoin offered a hedge against equities. Last year's market havoc threw cold water on this idea as the cryptocurrency's correlation with stocks hit an all-time high before falling recently to its lowest since 2021 . "When we speak to investors, we often hear people expecting a hard landing and the markets have started positioning for a U.S. dollar debasement and U.S. rate cuts, thus there is a rising preference for gold as a hedge," Bernstein analysts Gautam Chhugani and Manas Agrawal said in a note Monday. The analysts noted that despite the cryptocurrency being the best performing asset this year, "there is limited belief that this is structurally a new bitcoin cycle and that bitcoin will see fresh allocations." "We find this position somewhat irrational," they added. "If you like gold here, you should like bitcoin even more … Gold and bitcoin correlation increases during the periods of crisis. And when there is a massive monetary debasement event, while both bitcoin and gold rally, bitcoin outperforms gold." For example, after the Federal Reserve loosened monetary policy to support the economy at the start of the Covid pandemic, bitcoin outperformed gold 2.9x over the three-and-a-half-year period, they noted. This year, the banking crisis fears in the U.S. have helped push bitcoin to even greater gains this year, while gold is up roughly 10%, Bernstein found. "Liking gold, but not liking bitcoin, is like hating on a faster horse," they said. BTC.CM= YTD mountain Bitcoin (BTC) YTD —CNBC's Michael Bloom contributed to this report.