(Kitco News) - There has been a sharp reversal of fortunes between gold and Bitcoin, but according to one fund manager, investors looking for portfolio diversification should continue to invest in both assets.
The new Trump administration has been extremely supportive of the cryptocurrency space. However, even the President's best efforts have not been enough to push prices back to their record highs set at the start of the new year.
Last week, Trump signed an executive order creating a strategic Bitcoin reserve, but the announcement underwhelmed market expectations as the reserve will be made with BTC it already holds.
Bitcoin is currently consolidating around $83,000 a token, down 24% from its all-time high from Jan. 20. The digital currency has given up nearly three-quarters of its gains since November. Meanwhile, gold prices are consolidating near their all-time highs above $2,900 an ounce.
In a recent interview with Kitco News, Charlie Morris, Chief Investment Officer and Founder of ByteTree, said that it’s not surprising that gold is outperforming Bitcoin as it has a long history of wealth preservation, making it a respected safe-haven asset.
He said that Bitcoin’s rally has been all about President Trump, and this trade has room to unwind further.
Morris’s firm manages the BOLD Index, which invests in both gold and Bitcoin. He added that although Bitcoin has room to go lower, now is not the time to give up on it as it still has incredible potential.
He noted that the Index is currently heavily weighted towards gold, with three-quarters of the fund in precious metals and 25% in Bitcoin. Morris pointed out that Bitcoin’s weighting was as low as 10% in 2017.
“Gold is a $20 trillion global asset and Bitcoin is about a $2 trillion asset. Will Bitcoin ever catch up to gold? Well, probably not in my lifetime, but it will happen one day,” he said. “The demand for alternative assets will only continue to grow as governments continue to spend.”
Morris said that what makes gold attractive is that investors are trying to hedge against economic uncertainty and chaos with low-volatility assets. He pointed out that last year gold’s long-term volatility was 15%.
Meanwhile, Bitcoins volatility last year was around 40%. Morris noted that only a couple of years ago Bitcoin’s volatility was closer to 100%. He added that as the market grows, he would expect the price action to stabilize further.
Morris pointed out that U.S. spot Bitcoin ETFs have only been around for a year and it still isn’t an investable asset in many countries.
“Slowly, every year Bitcoin gets bigger and stronger,” he said. “First, banks banned it, then they started to embrace stablecoins, and then people were worried about the energy it takes to process the coins, so we looked to renewables and finally, we got investable ETFs. One by one, Bitcoin has been fighting these battles and winning.”
As for how far Bitcoin might fall in its latest correction, Morris said that he could see prices testing support around $70,000.
