In March, Bitcoin exhibited a significant correlation with gold, suggesting its potential as a safe-haven asset.
As a banking crisis unfolded in the United States, Bitcoin increased by 25% to approximately $28,000, and gold increased by over 8% to reach its all-time high of $1,988 per troy ounce.
The correlation between Bitcoin and the S&P 500 index has decreased to 20%, continuing a downward trend that began in December 2020, as Bitcoin’s status as a risk asset shifts in response to shifting investor perceptions of its value.
Although cryptocurrencies are often considered risky investments, Bitcoin’s limited supply, bound at 21 million, supports its value, similar to gold’s finite accessibility.
Due to Bitcoin’s sensitivity to changes in liquidity and the Federal Reserve’s monetary policy, it will continue to be affected by stock market-related factors.
Nonetheless, the decreasing correlation between Bitcoin and equities suggests a potential decoupling, allowing Bitcoin to perform more like a safe-haven asset during market volatility.
Yesterday at WrestleMania 39, the California-based rapper Snoop Dogg was spotted wearing a golden hardware wallet that resembled an expensive chain.
According to Aubert, Bitcoin’s classification as a risky asset could change as investors’ perceptions of its value shift, noting that Bitcoin is difficult to put into a conventional framework.
Due to its well-known limited supply, Bitcoin is technically a more difficult asset than gold, according to Butterfill.
While the convergence of Bitcoin and gold may be speculative, Bitcoin’s strong correlation with gold and its potential as a safe-haven asset in times of market duress make it an intriguing investment opportunity.