Gold vs Cryptocurrencies - Rhona O'Connell, StoneX Financial Ltd Nick Frappell, ABC Bullion Gregor Gregersen, Silver Bullion Pte Ltd Adrian Ash ...
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Gold vs Cryptocurrencies
Rhona O’Connell, StoneX Financial Ltd
Nick Frappell, ABC Bullion
Gregor Gregersen, Silver Bullion Pte Ltd
Adrian Ash, BullionVault
Charlie Morris, ByteTree Asset Management Ltd
Crypto and gold; friends, foes or allies?
Rhona O’Connell, Head of Market Analysis EMEA & Asia
StoneX Financial Ltd
17th June 2021
Disclaimer This communication is issued in the European Economic Area by StoneX Financial Europe S.A. STONEX is the trade name used by STONEX GROUP INC. and all its associated entities and subsidiaries. StoneX Group Inc. companies provide financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. StoneX Financial Ltd. “SFL” (formerly INTL FCStone Ltd.) is registered in England and Wales, company no. 5616586. SFL is authorised and regulated by the Financial Conduct Authority (registration number FRN:446717) to provide to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. IFL is authorised & regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the Financial Conduct Authority. Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. This presentation contains information based on future predictions. Past performance is not a reliable indicator of future performance. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc. © 2021 StoneX Financial Ltd. All Rights Reserved.
Composition of BGCI
Source: Bloomberg Galaxy Crypto Index
4
The BGCI and gold; risk hedges?
Source: Bloomberg, StoneX
5BGCI and VIX index
Source: Bloomberg, StoneX
6Gold and VIX index
Source: Bloomberg, StoneX
7Gold and Crypto – the debate
Nicholas Frappell
Global General Manager
ABC BullionDisclaimer:
• This document has been prepared by Australian Bullion Company (NSW) Pty Limited (ABN 82 002 858 602) (ABC). The information contained in this
document or internet related link (collectively, Document) is of a general nature and is provided for information purposes only. It is not intended to
constitute advice, nor to influence any person in making a decision in relation to any precious metal or related product. To the extent that any advice is
provided in this Document, it is general advice only and has been prepared without taking into account your objectives, financial situation or needs
(your Personal Circumstances). Before acting on any such general advice, we recommend that you obtain professional advice and consider the
appropriateness of the advice having regard to your Personal Circumstances. If the advice relates to the acquisition, or possible acquisition of any
precious metal or related product, you should obtain independent professional advice before making any decision about whether to acquire it.
• Although the information and opinions contained in this document are based on sources we believe to be reliable, to the extent permitted by law, ABC
and its associated entities do not warrant, represent or guarantee, expressly or impliedly, that the information contained in this document is accurate,
complete, reliable or current. The information is subject to change without notice and we are under no obligation to update it. Past performance is not
a reliable indicator of future performance. If you intend to rely on the information, you should independently verify and assess the accuracy and
completeness and obtain professional advice regarding its suitability for your Personal Circumstances.
• To the extent possible, ABC, its associated entities, and any of its or their officers, employees and agents accepts no liability for any loss or damage
relating to any use or reliance on the information in this document.
• This document has been authorised for distribution in Australia only. It is intended for the use of ABC clients and may not be distributed or reproduced
without consent. © Australian Bullion Company (NSW) Pty Limited 2020.
9Does gold have a digital counterpart?
• Key investment characteristics of gold:
• No liability or counterparty risk
• No coupon, yield
• Moves inversely with the dollar
• In extremis, gold is ‘defi’ – can run without banks or even electricity.
• Above are some characteristics that are shared with BTC.
• Gold has a diverse and growing use-case, technologically relevant
10How gold behaves as an asset
• Gold price behaviour:
• Defensive, ‘risk off’, a well understood portfolio diversifier
• Best in low or negative real rates / slow growth environment
• Relatively low volatility, durable store of value
• Widely known and accepted
11Gold has a strong & inverse response to yields
12Gold has a strong & inverse response to yields
13Contrasts with BTC • A very short history, however BTC does appear to be: • ‘Risk on’ and ‘reflationary’ • Correlated with growth and ‘new economy’ equities – as it should be? • Works well in a rising yield environment • Moves inversely to USD • Highly volatile • Too early to talk about ‘store of value’ in a meaningful way Too 14
XBT has a less well defined relationship…
15Contrasting volatility
16Initial conclusion:
• Gold and BTC are sufficiently different that ‘digital gold’ appears
incorrect.
• Gold blockchain tokens’ lack of real success speaks to the difference
between the two assets
• Gold is ageless, a durable store of wealth & portfolio diversifier
• Best case is to treat gold and BTC as ‘complementary’ alternative
assets and respect their different strengths
17Cryptocurrencies and gold; the debate
Gregor Gregersen, Silver Bullion Pte LtdThe differentiations
19Is crypto a threat to gold?
Adrian Ash
Director of Research
BullionVaultHave gold trading volumes fallen?
21Has gold investing declined?
22Has gold investing declined?
Q4 2020: weakest
net gold investing
in over 10 years
130-tonne outflow
from ETFs came
after record 1,300t
build in 18 months
Central banks
above their 5-year
average, coin + bar
in line with theirs
Repeated in Q1 21
but Q2 stronger
23Have younger investors abandoned gold?
24Have younger investors abandoned gold?
2020 saw U-30s
fall to 13% of new
1st-time users
But 2020 was a
record year for
new users of
BullionVault
Number of 1st-
time U30 users
almost trebled
May 2021: U-30s
already 85% of
pre-Covid 5-yr avg
25Will crypto work when you need it to?
26Will crypto work when you need it to?
Gold shows zero
correlation with
US equities over
shorter periods
But on a 5-year
horizon, it has
traded higher
98.0% of the time
that the S&P500
(price index) has
fallen over 5 years
No small risk: 21%
of the time over
last 5 decades
27How gold and Bitcoin can thrive
side by side
Charlie Morris
ByteTree.comGold and Bitcoin compared
29Gold vs Bitcoin Flows
• Gold saw $20bn of inflows
between June and
September 2020.
• Then saw sharp reversal.
• Bitcoin flows accelerated
just as gold flows peaked.
• Another reversal in May
2021 as funds leave Bitcoin
and back gold.
Source Bloomberg: Bitcoin price and US 10-year rates plus 10-year breakeven since 2013
30Gold and Bitcoin sweet spots
• Gold and Bitcoin are positively
correlated with inflation
• Gold has performed best when
real interest rates have been
falling
• Bitcoin has historically performed
well risk-on conditions
• Both assets are vulnerable during
times of deflation
31Macro – Bitcoin is a risk-on asset;
It thrives when rates and inflation are rising
• Bitcoin has made
progress in the blue
shades and lost it in
the red.
• Bitcoin is risk-on.
• Has responded to
rising rates and
inflation expectations.
Source Bloomberg: Bitcoin price and US 10-year rates plus 10-year breakeven since 2013
32ByteTree BOLD
• Bitcoin + gold = BOLD
• Allocation based upon 360-
day inverse volatility
• are positively correlated
with inflation
• https://review-
am.cryptocomp.net/bold
Source Bloomberg: BOLD Index, Asian equities, NASDQ and the gold price rebased to $100 since 10/1/2014
33Thank you
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