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Crypto space about to beat gold in this category despite bitcoin's plunge, says Bernstein

Kitco News

(Kitco News) Despite the major selloff in bitcoin and other cryptocurrencies this week, the digital assets space is about to beat gold in one particular category, according to one Wall Street firm.

A Bernstein report looked at the value of gold held for private investment purposes. According to its findings, the total crypto market cap is now above $2 trillion, which is very close to the value of gold held for private investment purposes, CNBC reported citing the report.

"Investors need to find return streams that can hedge debasement risk and be a diversifier of equity risk at higher levels of inflation. These assets [cryptocurrencies] might have the potential to perform that function," Bernstein said in the report on Tuesday.

Bitcoin made headlines earlier this year when it reached a record high of $64,829.14, pushing the popular cryptocurrency's market cap above $1 trillion. However, since then, bitcoin fell more than $20,000, last trading at $42,683.77. This puts bitcoin's market cap at around $800 billion, according to Coin Metrics.

However, Bernstein's calculation is not entirely accurate as gold and cryptocurrencies have other uses as well. The report points out that if gold jewelry is taken into account, the gold market is worth around $8 trillion, which is at least four times bigger than the crypto space.

Bernstein's report comes at a very chaotic time for cryptos. Bitcoin alone shed around $15,000 over the course of one week and hit 3-month lows. Gold, in the meantime, finally saw some very encouraging price action after it breached $1,800 an ounce and hit a 3.5-month high of above $1,875 an ounce on Tuesday.

While gold still looks undervalued at these levels, bitcoin's long bet looks like one of the most overcrowded trades out there, at least according to the Bank of America fund manager survey. 

The survey polled 194 fund managers with $592 billion worth of AUM. The results could suggest a top in the bitcoin market, the survey said.

"'Long Bitcoin' is now the most crowded trade at 27%. Prior 'peaks' in crowded trades (tech Sep '20 & Sep '18, U.S. Treasuries Mar '20, U.S. dollar Jan '17 & Feb' 15) were associated with relative tops," the survey noted.

To read more about gold and bitcoin's price action this week, click here

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