Bitcoin has managed to establish itself as an investment vehicle in its own right thanks to its phenomenal growth in recent years. Its performance has attracted many investors to the entire cryptocurrency market. However, one physical asset class has recently managed to outperform bitcoin in the United States. Indeed, investor Jim Bianco has just revealed that the prices of used cars have risen faster than those of bitcoin and other stock market assets.
A breakthrough of over 20% over the last four months
A guest on CNBC’s Trading Nation last week, the president of Bianco Research said the used car industry is currently more beneficial than bitcoin. He based his analysis on the Manheim index which is designed to track price trends in the automotive market. ” If you want to know what’s the best investment you’ve probably had in 2021, it’s that car sitting in your driveway or in that garage. It appreciates faster than the stock market and lately faster than some cryptocurrencies “, did he declare.
In the past four months, used vehicle prices have actually increased by more than 20%. This performance is greater than that displayed by the S&P 500 and bitcoin. The cryptocurrency has risen by around 5% over the same period, while the S&P 500 has shown an increase of around 26% since the start of the year. Mr. Bianco concludes that an investor would be in a better financial position if they had a few used cars in their driveway rather than bitcoin in their wallet.
A market showing all the signs of a bubble
Mr. Bianco identified the two main drivers of the used car market: the semiconductor shortage and speculators who want to return vehicles for a profit. Car prices are at an all-time high, according to the Manheim Index. In November, the average price for new cars was just over $ 46,000 and used cars were around $ 27,500. This is’an increase of 27% compared to the same period in 2020.
According to Mr. Bianco, this market is showing all the telltale signs of a bubble. In a market where used car prices are believed to be a depreciating asset, their prices have continued to rise. Some of them have even seen their prices increase by 50% according to Mr. Bianco. When asked when these sky-high prices might start to come down, he estimates that it could as well happen in a year as in two weeks.
With bitcoin once again below the $ 50,000 mark, its performance will continue to lag behind used vehicles for a while. However, investors who would be tempted to turn to the auto market should beware of the bursting of the bubble that has settled there.
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Luc Jose Adjinacou
Far from having dampened my enthusiasm, an unsuccessful investment in 2017 in some crypto only increased my enthusiasm. I therefore resolved to study and understand blockchain and its many uses and to relay information relating to this ecosystem with my pen.