By Chris Dieterich
Few at the start of 2016 were predicting rallies in gold, U.S. Treasury bonds and… bitcoin.
And yet, here we are. The SPDR Gold Shares exchange-traded fund (GLD) is up 23% and has pulled in more than $10 billion in new assets this year. The iShares 20+ Year Treasury Bond ETF (TLT) is up 14% in 2016, the highest level in a year. And, finally, the Bitcoin Investment Trust (GBTC) has nearly doubled over the past month. The former two assets have been powered higher by fear; fears that central banks are becoming helpless to bolster the economy, fears that the U.K.’s referendum will tear the European Union asunder. As for bitcoin, it would seem to be a series of structural issues combined with growing optimism that the underlying blockchain technology is going to be big. Here’s Ed Yardeni, the president and chief investment strategist at Yardeni Research, on Thursday:
“Recent developments in the financial markets have done little to bolster confidence in government-sponsored ‘fiat’ currencies. Meanwhile, bitcoin and gold, two instruments known to attract people wary of traditional financial institutions and central banks, are enjoying strong rallies. …
Research papers are declaring bitcoin a new asset class, while Wall Street and other financial institutions are looking at how they can harness blockchain to cut costs and bolster security. Perhaps most dramatically, people in Africa are digitizing their currency and storing it on their cell phones without ever opening a bank account. …
We’ve maintained that while bitcoin attracted much attention, it’s really the technology behind the currency, blocktrade, that has the potential to have a more wide-ranging impact on the financial markets. Banks and brokers have begun looking at how blocktrade could be harnessed to track trades and lower trading costs.”
Last year, Ark Invest, a niche ETF company, purchased units of the Bitcoin Investment Trust (GBTC) and made one of its ETF the first to own bitcoin in some form. I’ll admit that I was skeptical, but hedged my skepticism somewhat by saying to treat bitcoin as a lottery ticket. This week’s bitcoin surge — the GBTC is up 34% — leaves the ARK Web x.0 ETF (ARKW) with a roughly 3.5% weight in the bitcoin trust. ARK Invest published a research report earlier this month, in conjunction with Coinbase, calling bitcoin an “new asset class” altogether.