Markets & Metals Navigator: Bitcoin Decouples from Precious Metals

The Bitcoin Rocket

Bitcoin, the biggest investment story of 2020, has come strong out of the gates in 2021 – up 37% YTD to Friday’s close – $40,235 (see graph below).  The digital currency has once again captured the imagination of investors, especially during a period of economic volatility.

Precious metals have unfortunately been orphaned during Bitcoin’s meteoric risk, silver and gold were down -4% and -3% respectively last week.

The critical question is whether institutional investors skip over precious metals directly into Bitcoin as their store of wealth asset. Gold has been under-owned by global institutional money managers (ie. negligible or 0% weight), we believe one of the biggest challenges for institutions to step into Bitcoin is the significantly higher volatility relative to gold.

So irrespective of Bitcoin’s trajectory we believe that gold and silver will post a strong year on the back of the historically high levels of central bank money printing and government spending. We view the gold and silver miners as the leveraged upside trade on these dynamics.

Tesla and the Green Metals Boom

The results of the Georgia senate runoffs on January has added rocket fuel to Tesla’s (NASD:TSLA) already booming share price – Tesla finished the week up 25%.  Now that the Democrats control both the U.S. senate and house Biden will be able to push through large stimulus packages that will undoubtedly have significant exposure to the green economy.

Capital 10X has viewed the green metals as the best risk-adjusted way to play the electric vehicle boom. The Global X Lithium ETF was up 15% last week, while the Global X Copper Miners ETF was up 12%.

Sierra Metals – The Value Play in Copper

Sierra Metals (NYSE:SMTS, TSX:SMT) remains one of the few value plays in the copper space, last week the company announced they were undertaking a strategic review to maximize shareholder value.  The strategic alternatives could include a sale of some or all of their assets, merger or other business combinations.

Capital 10X believes there is real tangible value to be unlocked from Sierra Metal’s strategic review process as the company trades at a material discount relative to all its commodity peers (see relative multiples below).

With Democrats in Control – U.S. Cannabis Stocks Become the Main Event

Cannabis stocks also got a big boost from the Democrats taking both senate seats in Georgia. With the Democrats in control of both chambers they will be able to push through more comprehensive legislation towards the pathway to national legalization.

The AdvisorShares Pure US Cannabis ETF (NASD:MSOS) was up 13% last week, this is an ETF with exposure to just US cannabis operators.

Counterintuitively the Canadian cannabis index – Horizons Marijuana Life Sciences ETF (TSX:HMMJ) was up 19% last week, investors bid up shares of large Canadian operators (Canopy, Aphria, Cronos) on the view that U.S. legalization will allows these companies opportunities to operate south of the border.

Sierra Metals is a market awareness client of Capital 10X.