Bitcoin, gold, or stocks: which of these has 'never been more expensive'? Lyn Alden

(Kitco News) - With cryptocurrencies and equities continuing to push to new all-time highs while gold still lags, many investors are wondering if and when a rotation will happen away from risk assets into safe haven assets.

Lyn Alden, founder of Lyn Alden Investment Strategy compares the valuation metrics of gold, cryptocurrencies, and equities, and evaluates which of these, in her opinion, has "never been more expensive."

"By most metrics, equities are more overvalued than other asset classes," Alden told David Lin, anchor for Kitco News.

Alden cited several indicators that point to overvaluation in the stock markets.

"Over the past year, we've had a record high market capitalization to GDP ratio in the United States. That's not the case in many other countries, but in the United States we've reached very high valuations, even higher, by that metric, than the Dot Com bubble," she said. "Most metrics show that we're at the second most expensive [period] ever. If you look at the cyclically-adjusted price to earnings ratio, if you look at dividend yields, we're roughly second to where were in the Dot Com bubble, but by a couple of metrics like price to sales ratio, or market cap to GDP, the United States has never been more expensive than it is right now."

By comparison, gold is more fairly valued, Alden noted.

"Gold…by most conservative metrics, it's undervalued. By more aggressive metrics it's maybe fairly valued. For example, if you look at gold compared to other commodities, you're generally on the more pricey side for gold. If you look at how many ounces of gold it takes to buy the median house, you're still looking a bit more on the pricey side for gold. But, if you're looking comparing gold to the amount of broad money supply in the system, if you do it on a per capita basis, or if you take into account gold's inflation rate, basically the mining rate, that's about fairly valued," she said.

On cryptocurrencies, the fair value of Bitcoin would depend on assumptions for growth, for example, the percentage of market capitalization of another asset, such as gold, that Bitcoin would eventually take up, Alden noted.

One observation Alden has made is that during a bull run for Bitcoin, altcoins tend to outperform.

"When Bitcoin has a bull market, there are periods of time where thousands of other cryptocurrencies that are created start actually outperforming, and that's investors going out on the risk curve," she said. "Basically, what you're seeing in the crypto space is that Ethereum is doing very well, that's the second largest cryptocurrency and then if you go down into DeFi protocols and things like that, a lot of those have been explosive. You also see NFTs, they've taken some of the heat away [from Bitcoin]. We've also had that big Dogecoin spike."

Bitcoin may still have some upside, but its potential is limited at current valuations, Alden said, adding that the largest cryptocurrency is still more fairly priced than some altcoins, like Dogecoin.

"There's still a good chance that Bitcoin has further upside this year. It's a less asymmetric trade idea than it was back in 2020 when it was $10,000 a coin. Now that it's risen so much, there's still a lot of on-chain indicators that look attractive," she said. "I would agree that I think a lot of the other protocols are overvalued, and the classic case would be Dogecoin."

Alden said that eventually, Bitcoin will likely have a big correction, the only question is from what price level.

Sourse: kitco.com

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