Is Bitcoin Losing Its Image Of A Safe Haven As Gold Soars Amid Eastern European Crisis?

The widespread adoption of Bitcoin in recent years has managed to tie the best cryptocurrency to traditional finance in more ways than one. While institutional interest has been a positive sign for the digital asset industry, it has also caused Bitcoin’s price to follow that of US stock markets.

Concerns about the rising correlation between Bitcoin and the S&P 500 have been growing for some time, ergo, these have recently been renewed as macro events cause both markets to plummet.

In fact, the correlation between US stocks and Bitcoin reaches a new all-time high earlier this week, even as both markets continued to lose points amid rising threats of war between Russia and Ukraine.

Source: CryptoQuant

As can be seen in the above chart, this correlation has been steadily rising since mid-2021 as macroeconomic pressures weigh on both markets. This includes statements from the US Federal Reserve about rising inflation and the decision to raise interest rates to curb it.

Holiness

However, when Russia invaded its neighbor Ukraine on February 24, riskier markets such as stocks dived even deeper, along with most of the top cryptocurrencies. Interestingly, while a recovery was noted earlier today after US sanctions against Russia calmed investor sentiment, gold has emerged as the winner during this crisis. Investors were able to hedge their capital in this traditional haven, rejecting previous beliefs that Bitcoin was a better store of wealth than gold.

While this proves that Bitcoin has yet to truly become a safe haven “from a macro perspective,” Santiment noted in a report That the high correlation with the S&P 500, which tracks the 500 largest companies trading in US markets, proves that institutional interest in crypto has grown many times as equity investors enter the market.

In addition, the 60-day correlation between BTC and S&P 500 was 0.6, the highest possible score of 1. noted Bloomberg, indicating that both markets behaved in a very similar way. However, the divergence of this indicator could foreshadow the next bull run for Bitcoin, whose 24-hour price change was 10.2% at the time of writing.

Leave a Comment