An illustration of bitcoin on euro banknotes.
Nicolas Economou | NurPhoto by Getty Images
Analysts at Goldman Sachs have identified a surprisingly similar trend between the world’s most valuable virtual currency and a base metal with a reputation as a barometer for the global economy.
Bitcoin and copper prices both fell for most of this year, hitting record amid the ongoing coronavirus pandemic.
“Both institutional investors and wealthy people avoid cryptocurrencies because of its inherent transparency issues, while speculative retail investment causes Bitcoin to act as an excessively risky asset,” Goldman Sachs analysts said in a statement. research published on Thursday.
“In fact, from the depths of the first blockade, Bitcoin growth has closely followed that of copper, a key proxy for global growth,” they added.
Bitcoin prices have risen. The volatile cryptocurrency, in a move that reminded many market participants of a similar rally in 2017, rose to more than $ 20,000 on Wednesday for the first time in its history.
Since then, it has breached $ 23,000, according to cryptocurrency market data provider Coin Metrics, before earning gains on Friday to trade at about $ 22,899. In mid-March, during the first wave of the coronavirus pandemic, Bitcoin traded below $ 5,000.
The growing popularity of bitcoin has made it an asset that is widely traded, just like fiat currencies.
The smelter melts copper on July 23, 2020 in Jinhua, Zhejiang, China.
TPG | Getty Images News | Getty Images
Meanwhile, copper prices breached $ 8,000 a tonne on Friday, the highest level since February 2013. Three-month copper prices on the London Metal Exchange have since gained, trading at $ 7,991 during lunch transactions.
Goods grew by more than 28% year-on-year, rising for the fourth positive year out of five.
Copper’s stock market run in 2020 coincides with a rally among other stocks and risky assets in recent weeks, with market sentiment improving on positive news about Covid-19 vaccines.
Copper – sometimes called Dr. Copper – has a reputation among market watchers as a barometer for the global economy. The base metal is viewed in this way due to its wide range of end uses – both in construction and in consumer products, such as cars and appliances.
Earlier this month, Goldman Sachs said it was “very likely” that copper prices would test the existing record highs of $ 10,170 set in 2011 by the first half of 2022.
“Bitcoin is retail trading”
In addition to identifying the mirrored bitcoin and copper rally in recent months, analysts at Goldman Sachs said they believe bitcoin and gold will be able to “coexist.”
“The recent performance of gold against real rates and the dollar has left some investors worried that Bitcoin is replacing gold as hedging inflation of choice,” said the US investment bank.
“Although there are some changes, we do not see the growing popularity of Bitcoin as an existential threat to the status of gold as a currency of last resort.”
The bank added: “In our opinion, bitcoin is the retail trade, while gold is a defensive asset, with the preservation of real capital in the long run.”
– CNBC’s Katrina Bishop contributed to this report.