Bitcoin’s Correlation With Gold Is Rising, And Here’s What That Means – Bank of America
(Kitco News) As Bitcoin clings to support above the $19,000 level, the world’s largest cryptocurrency is increasing its correlation with gold, Bank of America (BofA) said. And that means investors are using Bitcoin as a safe haven.
When BofA analyzed market activity, it noted that Bitcoin’s relationship with gold was remarkable.
“A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU [gold] indicates that investors may view bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen,” said BofA crypto and digital asset strategists Alkesh Shah and Andrew Moss.
The correlation between bitcoin and gold is seen as an inflation hedge/store of value, the strategists explained.
From June 2021 to February 2022, the correlation remained close to zero. In March 2022, it became negative. In September, the correlation turned positive and continued to climb, Shah and Moss wrote in a report published Friday.
Overall, market activity in the crypto space points to “limited directional conviction as investors move to the sidelines and await macro/investor capitulation,” according to the report.
The market value of the top 100 digital assets is down 3% in the past two weeks and is down 60% year to date.
Over the past four weeks, Bitcoin has seen exchange flows of $2.6 billion, which was 3.6 times larger than currency inflows over the same period, the strategists said. “Dividend flows for 3 of the previous 4 weeks (BTC +2% last 4 weeks) indicate that investors continue to HODL rather than sell on strength,” Shah and Moss said.
In the last week alone, Bitcoin exchange totaled $1.4 billion and was the largest since mid-June. And that means more bearish sentiment in the short term. “Large and continuous outflows into weakness, tight supply and whale accumulation indicate limited short-term selling pressure,” Shah and Moss wrote.
Bitcoin last traded at $19,502, up 1.5% on the day, but down 72% from its November 2021 record high of $69,000.
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