Bitcoin is slowly regaining its safe haven status alongside gold
Bitcoin’s fall of around 60% for the year may have knocked down the narrative that the leading cryptocurrency can serve as a safe haven, but it is slowly returning to form alongside gold.
Bitcoin, especially during the height of the bull run last year, has been touted as a way to park cash in an uncertain market environment, and has been dubbed “digital gold.” Of course, fast forward to the start of 2022, and the discorrelation from stocks and bonds fell to the wayside.
Bitcoin has mostly trailed both assets to the downside, but it has been relatively stable over the past couple of months. Analysts at Bank of America revealed that bitcoin has stood alongside gold and regained its safe haven.
“Alkesh Shah and Andrew Moss of Bank of America Securities (BofAS) said in a recent report that the world’s largest cryptocurrency now has a high correlation with gold prices, suggesting it is being used as a hedge against greater market uncertainty,” a Decrypt article noted.
“In early September, the relationship between gold and Bitcoin turned positive again, and in early October, the correlation reached its highest point in a year,” the article noted.
A rising wave of interest rates has capital markets wondering whether the US Federal Reserve will continue to tighten. As such, safe haven searches have investors rethinking bitcoin, especially given its recent correlation with gold.
“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, the BofA analysts said.
Tail Bitcoin’s price moves with futures
Investors don’t have to settle for pure bitcoin exposure when looking to achieve correlation with price movements. Futures can achieve this, as can an exchange-traded fund (ETF) that addresses bitcoin futures, such as ProShares Bitcoin Strategy ETF (BITO).
The fund provides exposure to bitcoin futures, tracking the price movements of the leading cryptocurrency on a normal market exchange. BITO has shown an almost one-to-one correlation with bitcoin’s price since its introduction a year ago.
Furthermore, the fund is actively managed, giving investors peace of mind knowing that their investments are in the hands of experienced portfolio managers. Bitcoin can be a volatile asset, and active management can make portfolio changes on the fly when market conditions warrant an adjustment.
Investors may be hesitant to gain pure bitcoin exposure given the trading on unregulated exchanges. BITO provides this tactical exposure while staying within the regulatory framework of the traditional financial market, increasing its potential security.
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