Bitcoin Beats Stock Performance, Digital Gold Returns?

Ever since it lost around 80% of its value from its all-time high, Bitcoin has been questioned as a store of value and a digital equivalent of gold. The digital currency has remained the best performer of any asset over the past decade, but critics are quick to point out the past year’s losses.

However, Bitcoin may be set to take control of its narrative once again as the digital version of gold, the cryptocurrency outperformed the old financial markets and managed to keep the bears away from their current levels. At the time of writing, BTC’s price is trading at $20,000 with a profit of 4% in the last 24 hours.

Bitcoin holds the line as stocks trend to the downside

Data made sure of by Arthur Hayes, founder of crypto exchange BitMEX, shows an increasing correlation between Bitcoin and major stock indices. As the US central bank (Fed) changed monetary policy to keep inflation in check, the risk on financial assets began to move in step.

So if traditional markets crashed, Bitcoin followed. This has been the status quo for months as the Fed becomes more aggressive and hikes further, pushing stocks and BTC to fresh multi-year lows.

Hayes claims that the 30-day correlation between BTC and the Nasdaq has gone hot to the upside, “trending in the wrong direction”. On low timeframes, however, the decoupling from the two assets is starting to take shape.

As shown below, the 10-day correlation between Bitcoin and the Nasdaq 100, one of the most important stock indices on the planet, is declining and heading to the downside. Hayes classified this performance as “good”; he believes that when BTC and other cryptos can trade on their own, they will be able to outperform stocks and kick off another bull run.

BTC’s Price Begins Bullish Ascent?

As mentioned, Bitcoin seems to be starting to behave as predicted. Additional data provided by Arcane Research shows that BTC’s price was able to outperform the stock market in the month of September, despite the ongoing turmoil across financial markets.

As shown in the chart below, the number one cryptocurrency by market cap recorded no losses in that month. The dominant trend was neutral and sideways. Meanwhile, the Nasdaq 100 and S&P 500 lost 9% and 8%, respectively, during the same period.

Arcane Research noted the following on how BTC and hold have been able to preserve their value as global markets trend lower:

Amid this macro turmoil, gold has held its value relatively well, falling 3% in line with bitcoin’s performance. Over the past two years, bitcoin has followed the stock market closely, but with higher volatility (…). Bitcoin’s recent outperformance of the stock market during a weak period gives some hope to investors clinging to the digital gold narrative.

It remains to be seen if BTC’s price’s current bullish momentum will see any follow-through or if investors will become less lax, with hopes rising as the cryptocurrency once again follows older markets.