Does Bitcoin’s increased correlation with gold mean that investors see it as a safe haven?
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Answer Does Bitcoin’s increased correlation with gold mean that investors see it as a safe haven?
The narrative “Bitcoin is a safe haven” continues despite its inaccuracy on several previous occasions, as Bitcoin is affected by the general economic situation like other assets.
But market strategists at Bank of America they see Bitcoin’s increasing correlation with gold suggests that investors may view Bitcoin as a relatively safe haven.
Alkesh Shah and Andrew Moss, market strategists from Bank of America’s securities division, explained this week that bitcoin and gold have been highly correlated lately.
This news comes on the heels of a recent report by crypto data provider Kaiko, which says that bitcoin has been less volatile than the Nasdaq and S&P 500 indices.
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According to Bank of America strategists, the fluctuations in the price of Bitcoin compared to other global assets have made investors believe that Bitcoin is a safe asset.
Bank of America securities analysts wrote:
A slowing positive correlation with SPX/QQQ and a rapidly increasing correlation with XAU gold suggests that investors may view Bitcoin as a relatively safe haven as overall uncertainty persists and the market bottom remains to be seen.
Yesterday, Monday October 24th, both bitcoin and gold prices were range bound and these assets were less volatile compared to the stock markets.
Bitcoin trades for just over $19,000 per coin, while an ounce of 999 pure gold is exchanged for $1,646.70.
Analysts Shah and Moss of Bank of America have been monitoring the 40-day relationship with gold, which is around 0.50 this week.
The 0.50 rating is substantial compared to its predecessor and shows a stronger association with the precious metal.
The move comes at a time of heightened overall uncertainty, and analysts have warned that a US Federal Reserve interest rate hike could trigger a liquidity crunch in US Treasuries.
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Market watchers anticipate a rate hike next month.
The combined decline of bitcoin and gold:
Both gold and bitcoin have fallen dramatically since the asset prices ever rose.
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For example, gold hit an all-time high against the dollar on March 8, 2022, when gold reached $2,074 an ounce.
Gold has lost 20.49% against the dollar since its all-time high 230 days ago.
While Bitcoin has fallen 72% against the dollar over the past year, after benefiting from a peak of $69,044 on November 10, 2021.
The total market capitalization of gold today is around $10.895 trillion, while the market capitalization of Bitcoin is around $371 billion.
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