Bitcoin's YTD yield of 45.95% in 2020 is impressive despite the high volatility and low performance compared to other digital assets such as Ethereum and DeFi tokens.
However, as the most dominant currency in the cryptocurrency market, Bitcoin serves as a benchmark for analysts' evaluation of the cryptocurrency market versus the traditional market.
At a time of limited potential, Bitcoin should benefit more and, in the process, trigger a surge in the value of stocks and bonds, according to Bloomberg Intelligence senior commodities strategist Mike McGlone.
"#Bitcoin is an outstanding fixed supply asset that should be a primary beneficiary in a period of limited additional upside potential in stocks and bonds in our opinion."
Bitcoin has superior control over inflation
The massive quantitative easing under way as governments expand fiat currencies to support coronavirus fiscal measures has led to reduced faith in the economy, leading to more major investors leaving the traditional market.
"#QE juxtaposed against Bitcoin supply tightening leaves adoption and demand as the main metrics for price outlooks."
As fiat inflation continues to grow and potentially spiral out of control, Bitcoin's monetary policy is written in code and halved every four years during its halving event.
Cameron Winklevoss of Gemini exchange recently stated that Bitcoin is a unique product whose supply is not dependent on demand and cannot be recklessly expanded, unlike other well-known stores of value.
“Bitcoin is the first commodity in the universe where supply does not follow demand. The demand for bitcoin cannot expand its supply ”.
Bitcoin has also been referred to as the internet's only sovereign currency by notable personalities like Twitter's Jack Dorsey, a fact that could see the potential for its market capitalization to reach tens of trillions of dollars.
However, for Bitcoin to reach such potential, investors continue to insist that it would need to have an economy built around it to minimize the influence of speculators and traders on its price movements.
Many companies like MicroStrategy have recognized and embraced the value of Bitcoin as a practical hedge against fiat inflation, but the rise of DeFi will also play a key role in establishing the necessary economy around Bitcoin.
Fiat's high inflation is good for Bitcoin's success
Compared to the stock market, alternative stores of value have been best performed in 2020, due to massive inflation as investors look to reduce their exposure to fiat currencies.
"#Gold and #Bitcoin ended Sept. 21 roughly 25% and 45% higher in 2020 compared to a nearly flat S&P 500, indicating a relative value tilt."
According to McGlone, Bitcoin and other major cryptocurrencies are good examples of Quasi currencies that are highly liquid assets that are not money but can be quickly converted to cash.
"The certainty of QE in the face of the uncertainty of the fiscal stimulus and an unstable stock market is a basis for the passing of the performance baton to quasi currencies."
Bitcoin will benefit from traditional investor sentiment, who are unsure how much inflation will rise as governments watch. This uncertainty, as McGlone said, will favor Bitcoin and other cryptocurrencies.
"A shift in momentum towards relative value is potentially at hand, favoring #Bitcoin and #cryptocurrencies over the # stock market."