Bitcoin's Correlation with Gold Hints at Return to Haven Status, BofA Says

Bitcoin's Correlation with Gold Hints at Return to Haven Status, BofA Says

Changing Bitcoin correlations could mean it is becoming a haven again, says BofA strategists. Changes occur as macroeconomic uncertainty persists. The cryptocurrency’s relationship with gold has strengthened in recent months.

According to Bank of America Corp., Bitcoin's movement against other assets could indicate that investors are seeing it becoming a safe haven again after being traded for some time mostly as a risky asset, according to Bloomberg. Bitcoin has a 40-day correlation with gold of about 0.50, up from around zero in mid-August. While the correlations are higher with the S&P 500, at 0.69, and Nasdaq 100 at 0.72, they’ve flattened out and are below record levels from a few months ago. BofA digital strategists Alkesh Shah and Andrew Moss see that as a sign that things could be changing.

“A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen,” the strategists wrote.

Bitcoin has traded in near lockstep with risk assets in the past couple of years, as a pandemic-era stimulus flooded the global economy, and then as central banks like the Federal Reserve hiked rates to combat worsening inflation. That is contradicted by one of the main investment narratives put forward by crypto believers, which is that the asset with a fixed supply could serve as “digital gold,” a safe haven free from the influence of decisions by central banks and governments.

The BofA note dovetails with recent comments from the likes of Mike Novogratz, who said on Thursday that he sees Bitcoin as “the canary in the coal mine” alongside gold and expects it to rally before other tokens, as well as Lauren Goodwin from New York Life Investments, who has said that Bitcoin and gold could both be perceived as a central-bank hedge.

At the time of this writing, Bitcoin is trading at around $19,578. It is still the number one cryptocurrency by market cap, now 72% below its all-time high of $68,789.

© 2022, Eva Fox | Tesmanian. All rights reserved.


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About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

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