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Historically, traditional market analysts and old-school investors tend to watch Bitcoin and other cryptocurrencies very closely, and when cryptocurrency experts try to make comparisons between the two, these investors say it’s like comparing apples to oranges.
Let’s take it as an example Warren Buffett, who has said several times that Bitcoin is nothing more than a Ponzi scheme, as it produces nothing and is therefore useless.
According to these traditionalists, comparing Bitcoin with Apple, Tesla or a stock of a bank like JPMorgan is something irrational, as the latter employs workers, creates products and generates income and dividends which are distributed among shareholders.
Despite these arguments, a simple fact remains. Bitcoin has had a solid year and the digital asset is outperforming financial stocks this 2020 due to a notable increase in institutional demand, investor confidence in BTC’s exponential growth potential and its asymmetric price action in the face of global economic uncertaintyL.
As you can see in the graph below, Most major US banks posted record second quarter results as the entire market rebounded from the COVID-19-induced selloff in mid-March, But significant threats to the stock market and the global economy remain. At the same time, Bitcoin vastly outperformed the financial sector, particularly in the fourth quarter.
The price of bitcoin has risen 42% since the beginning of the fourth quarter
Since the beginning of the fourth quarter, Bitcoin’s price went from $ 10,773 to $ 15,366 on Binance. That’s an impressive 42% increase in less than two months and an example of the strong momentum of the digital asset.
The strength of Bitcoin’s move can be attributed in part to the rise perception that it is an alternative store of value. Earlier this year, the Wall Street billionaire investor, Paul Tudor Jones, described Bitcoin as the ideal game against inflation. The overall positive sentiment around BTC as a potential safe-haven asset is clearly driving the current trend.
Compared to other sectors, banking equities have performed relatively well since the March crash. The shift in demand from physical to online shopping hit businesses that didn’t have a fingerprint hard. But easing financial conditions, the Fed’s massive economic stimulus, and the government’s business-friendly stance led banks to outperform their quarterly estimates and perform well.
JP Morgan, for example, it rebounded by 32.63% from its low of 23 March. In the fourth quarter, the $ 319 billion banking giant increased by more than 8%.
In the second quarter of 2020, JPMorgan reported $ 7.3 million in revenue from bond trading, far exceeding the estimates of many analysts. At the same time, income from investment banking and equity trading also skyrocketed.
Other major banks, including Goldman Sachs has experienced a similar trend. The commercial division of Goldman posted sales of $ 4.55 billion. The bank beat Wall Street expectations with ease, registering an interannual increase of 29%.
While each of these is a respectable performance, especially considering the high levels of uncertainty and economic recession caused by the coronavirus pandemic, Bitcoin’s price action has overshadowed banks and other risky assets for most of this 2020.
Why does BTC continue to outperform most other assets?
Bitcoin has experienced a unique combination of a growing institutional demand and a steady increase in awareness among the mainstream audience.
According to a survey published by Grayscale, More than half of American investors are interested in investing in Bitcoin. The study stated:
“Interest is on the rise: more than half of US investors are interested in investing in Bitcoin in 2020, more than half (55%) of respondents have expressed interest in Bitcoin investment products. This marks a significant increase. 36 % of investors said they were interested in 2019. “
Businesses, investment banks and retail investors have recognized that Bitcoin has great growth potential, and this is perhaps why companies like it PayPal and Square have decided to support the market’s leading cryptocurrency.
Coincidentally, financial institutions that have actively supported cryptocurrencies have been performing well over the past few months.
PayPal shares, for example, have risen 12% in the past three days, showing optimistic momentum ever since A.D which would integrate the buying and selling of cryptocurrencies into its platform.
As we approach the end of 2020, Investors of all levels will be keeping an eye on the price of Bitcoin (BTC) to see if it continues to outperform equity markets by far.
The fact that the shares of major banks such as JPMorgan, Goldman Sachs, Citigroup and Bank of America have been overtaken by a cryptocurrency of “Small cap” is something significant and this is likely to attract many more investors to the cryptocurrency industry.
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