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Bitcoin Eyes Safe-Haven Status as Gold Correlation Returns, Says Bank of America

Despite Bitcoin’s volatility amid a wider economic rout, the leading cryptocurrency and gold appear to be behaving quite similarly.

2 min read
Bitcoin on top of gold. Image: Shutterstock

Bitcoin could once more be viewed by investors as a safe haven thanks to recent market activity, according to Bank of America analysts.

Alkesh Shah and Andrew Moss of Bank of America Securities (BofAS) said in a recent report that the world’s largest cryptocurrency now had a high correlation with gold prices, suggesting it is being used as a hedge against wider market uncertainty.

A safe-haven asset is one that is expected to protect portfolios during an economic downturn as they may be uncorrelated or negatively correlated to the broader economy. Gold is a primary example of a safe-haven asset.

 

Bitcoin’s relationship with gold has historically been used as a way to measure how confident investors are in the asset as a store of value. The two were closely linked from June 2021 to February 2022, but the correlation turned negative in March.

Two assets with a positive correlation indicate that they are behaving similarly, while those with a negative correlation are behaving differently from one another.

At the start of September, the relationship between gold and Bitcoin once again turned positive, and in early October, the correlation reached its highest point in a year.

At the same time, Bitcoin’s relationship with blue-chip stocks on the S&P 500 (SPX) and Nasdaq 100 (QQQ) reached all-time highs on September 13, though has since slowed.

The analysts wrote: “A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU [gold] indicate that investors may view bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen.”

Bitcoin and financial markets

Last week, new data showed that Bitcoin is now less volatile than both the S&P 500 and Nasdaq for the first time since 2020.

October has been largely uneventful for the cryptocurrency, which at current prices is up just 1.1% over the last month. 

This time last year, Bitcoin was experiencing a rapid rally that saw its highest-ever price recorded in November.

Hovering above $19,000, Bitcoin is presently down 69% on its value this time last year.

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