Mike McGlone, a Senior Commodity Strategist at Bloomberg Intelligence, recently shared his insights on the potential performance of gold relative to Bitcoin in 2024.
McGlone suggests that gold may have an advantage over Bitcoin in 2024, especially with the anticipated launch of U.S. Bitcoin ETFs. He notes that Bitcoin, which led most risk assets down in 2022 and up in 2023, could indicate its high market-beta status compared to gold, traditionally seen as a store-of-value metal. McGlone points to the potential for a reversion in stock market volatility, guided by the Bitcoin/gold cross rate.
On January 3, 2024, the ratio of Bitcoins to an ounce of gold was about 21x, significantly lower than its 37x peak in 2021. This decline occurred despite the S&P 500 revisiting old highs. McGlone interprets this as a possible indicator of a downward reversion in risk assets, suggesting that the lagging Bitcoin-to-gold cross rate could be a precursor to broader market movements.
Reflecting on the historical context, McGlone notes that when Bitcoin emerged following the Great Financial Crisis, both gold and the CBOE S&P 500 Volatility Index (VIX) were at record highs. He anticipates that in 2024, Bitcoin may face challenges similar to the tailwinds that previously buoyed gold, particularly in a volatile market environment.
During his appearance on Scott Melker’s podcast, McGlone expressed skepticism about Bitcoin’s continued rally post-SEC approval. He cites concerns about instability caused by recession worries, suggesting that gold tends to outperform riskier assets like Bitcoin and stocks in such conditions. McGlone emphasizes the importance of risk reduction, especially considering Bitcoin’s significant rally from its lower levels in the previous year.
“There’s almost always one simple prerequisite for things to break. Why did Lehman break? Why did FTX break? Risk assets have to go down. That’s what’s missing. And Bitcoin is one of the riskiest assets… We’ve had the hopium. We’ve rallied 50% from $30,000. We’ve rallied 3x from last year… I look at it like, Okay, great. Thank you. You don’t want to be getting overweight here. You want to be saying thank you.”
McGlone also addressed the potential outcomes of the SEC’s decision on spot Bitcoin ETFs. He warns that a ‘rug pull’ – a sudden withdrawal of support – would be detrimental, and even if spot Bitcoin ETFs launch soon in the U.S., historical lessons suggest that such events have not typically been favorable for the market. He observes a high level of hype and bullish sentiment, comparable to what has been seen at other market peaks.
CNBC’s Jim Cramer, seems to agree with McGlone that Bitcoin might be topping out soon:
At the time of writing, Bitcoin is trading at around $46,739, down 0.19% in the past 24-hour period.
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