There are many rationales for the long Bitcoin trade. We leave all those arguments to pundits to discuss, but if Bitcoin and gold have some similar features when it comes to the QE logic, the imploding USD etc, the relative long gold logic looks like it has some catch up potential.
JPM wrote in a late October note:
"the potential long-term upside for bitcoin is considerable if it competes more intensely with gold as an “alternative” currency we believe, given that Millennials would become over time a more important component of investors universe".
That is of course a generational play, older people like gold, younger Bitcoin, but that is the longer term view.
Should the above occur with time JPM notes:
"Mechanically, the market cap of bitcoin would have to rise 10 times from here to match the total private sector investment in gold via ETFs or bars and coins."
Second chart shows bitcoin correlation vs other assets.
The PayPal news in October reignited Bitcoin's momentum, but just as we have seen in many other assets, options and futures volumes have surged (chart is pre this last squeeze). There is probably some healthy retail gamma pushing Bitcoin higher…
Do you chase Bitcoin that trades at 50-60% vol here or do you go for the slightly "older" trade in gold at around 20% vol?