Historically speaking, traditional market analysts and old-school investors tend to look cautiously against Bitcoin and other cryptocurrencies, and when crypto experts try to compare the two, these investors say there is an argument against apples and oranges.
Take, for example, Warren Buffett, who has said several times that Bitcoin is nothing more than a Ponzi scheme, because it produces nothing and thus has no value.
For these traditionalists, it makes no sense to compare bitcoins with Apple or Tesla, or bank stocks like JPMorgan, where the latter employ workers, produce products, and generate income and profits that are distributed to shareholders.
Despite these arguments, the simple truth remains. Bitcoin had a successful year, digital assets outperformed financial stocks in 2020 due to massive increases in institutional demand, investor belief in the potential for exponential growth of BTC and its disproportionate price behavior amid global economic uncertainty.
As shown in the chart below, most of the major US banks recorded record results in the second quarter as the market fully grew after sales of COVID-19 in mid-March, but there are still serious threats to the stock market and the global economy. … Meanwhile, Bitcoin greatly outperformed the financial sector, especially in the fourth quarter.
Bitcoin price action against JPM, Goldman Sachs, BofA and Citigroup. Source: TradingView.com
Bitcoin has increased by 42% since the start of the fourth quarter
Since the start of the fourth quarter, the Bitcoin price on Binance has increased from $ 10,773 to $ 15,366. This is an impressive 42% growth in less than two months and a testament to the strong dynamics of the digital asset.
Quarterly yield (%). Source: Skew.com
The strength of Bitcoin’s rise may be partly due to the growing acceptance of an alternative store of value. Earlier this year, Wall Street billionaire investor Paul Tudor Jones described Bitcoin as the perfect game for inflation. The overall positive attitude towards Bitcoin as a potential safe asset is clearly gaining traction.
Compared to other sectors, bank stocks have performed relatively well after the March crash. The shift in consumer demand from retail to online shopping has affected companies that do not have a digital footprint. However, mild economic conditions, massive economic stimulus from the Federal Reserve and the government’s business-friendly stance have forced banks to overlook quarterly estimates and deliver strong results.
For example, JPMorgan posted a gain of 32.63% from its lowest level on March 23. In the fourth quarter, the banking giant grew $ 319 billion more than 8%.
In the second quarter of 2020, JPMorgan recorded $ 7.3 billion in bond trading revenue, well above analysts’ estimates. At the same time, income from investment banking and stock trading rose sharply.
Other major banks, including Goldman Sachs, saw a similar trend. Turnover in Goldman’s trading division is $ 4.55 billion. The bank easily exceeded Wall Street expectations and increased 29% year-on-year.
While each of these calculations is commendable, especially given the high levels of uncertainty and economic downturn caused by the coronavirus pandemic, Bitcoin’s price behavior is dwarfing banks and other risky assets for much of 2020.
Why does BTC continue to outperform most assets?
Bitcoin performance versus total assets (%). Source: Skew.com
Bitcoin has consistently experienced a unique combination of growing institutional demand and a steady increase in public awareness.
According to a survey published by Grayscale, more than half of US investors are interested in investing in bitcoin. Studies say:
“Interest is growing: More than half of American investors are interested in investing in bitcoin. In 2020, more than half (55%) of respondents expressed interest in bitcoin investment products. This is a significant increase compared to the 36% of investors who said they were interested in 2019 . ”
Companies, investment banks, and retail investors have realized that Bitcoin has a lot of potential for growth, and this may be the reason why companies like PayPal and Square have decided to support the cryptocurrency.
Coincidentally, the financial institutions backing cryptocurrencies have performed particularly well in recent months.
For example, PayPal is up 12% in the past three days, showing upbeat momentum when they announced that they will consolidate the buying and selling of cryptocurrencies.
As 2020 draws to a close, investors at all levels will be watching the Bitcoin (BTC) price to see if it continues to outperform the equity markets.
The fact that stocks in large banks like JPMorgan, Goldman Sachs, Citigroup, and Bank of America stick to smaller cryptocurrencies is significant and is likely to attract more inquisitive investors into the crypto sector.