Morgan Stanley suggests Bitcoin may face tough times ahead, as it shares similarities with the movement of gold in the 1970s. According to CNBC, Morgan Stanley strategist, Sheena Shah, claims that “50 years ago, gold was also traded as a speculative asset” and that “Bitcoin has so far followed a similar path to the gold price speculation of the 1970s, moving in a four-year cycle.”
Gold in the 1970s followed the consumer price index (CPI) as governments explosively issued legal tender in response to crises. Shah notes that “from 1971, as the US dollar supply increased rapidly, the price of gold quadrupled in just four years.” Between August 1976 and January 1980, the gold price increased eight-fold, from $102 to $850, but the speculation had not yet reached its peak.
Shah adds that “the statistical similarity between Bitcoin and gold could be coincidental, as gold prices were managed for the first few years.” Bitcoin proponents emphasize its potential as ‘digital gold,’ citing its divisibility, scarcity, and independence from central issuers.
Some once argued that Bitcoin could serve as an alternative to stocks, but this claim lost steam as the correlation between cryptocurrencies and stocks reached an all-time high during last year’s market turmoil. As of last month, the correlation between Bitcoin and stocks fell to its lowest since 2021, while that of Bitcoin and gold rose.
In contrast, Wall Street investment bank Bernstein points out that Bitcoin recorded a 2.91 times higher return than gold over three years as the Federal Reserve lowered interest rates amid the COVID-19 pandemic. They predict “an unprecedented Bitcoin bull run is about to begin.” The report states, “the collapse of FTX and consecutive bankruptcies of US banks are catalysts for a new crypto bull market. Positive news for the crypto market includes the completion of Ethereum’s Shanghai upgrade, the success of Arbitrum, and the upcoming Bitcoin halving.”
With two opposing outlooks, it remains to be seen whether Morgan Stanley’s ‘disappointment’ or Bernstein’s ‘expectation’ will prevail.
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