Gold vs BTC Correlation Signals Bitcoin Becoming Safe Haven: BofA
Despite the ongoing cryptocurrency bear market, investors have increasingly viewed Bitcoin (BTC) as a safe haven, a new study suggests.
The rise in the correlation between Bitcoin and gold (XAU) is one of the key indicators showing investor confidence in BTC amid the ongoing economic downturn, according to digital strategists at Bank of America.
Bitcoin’s correlation with gold – which is often seen as an inflation hedge – has been on the rise this year, reaching its highest annual levels in early October. The rising correlation trend started on Sept. 5 after staying near zero from June 2021 and turning negative in March 2022, BofA strategists Alkesh Shah and Andrew Moss said in the report.
“Bitcoin is a fixed asset that could eventually become an inflation hedge,” the strategists wrote. However, the growth in the BTC/XAU correlation is not the only indicator signaling growing investor confidence in Bitcoin as a store of value.
Bitcoin has also become increasingly correlated with major stocks such as the S&P 500 (SPX) and the Nasdaq 100 (QQQ). The correlation between Bitcoin and both the SPX and QQQ reached all-time highs on September 13, the BofA strategists wrote, adding:
“A declining positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicates that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen.”
BofA strategists also mentioned massive Bitcoin outflows from exchanges to personal or self-powered wallets. According to the study, weekly BTC exchanges in early October were the largest since mid-June, marking the third consecutive week of outflows. Emphasizing that large and continuous outflows to personal wallets indicate limited short-term selling pressure, the strategists stated:
“Investors transfer tokens from exchange wallets to their personal wallets when they intend to HODL, indicating a potential reduction in selling pressure.”
The BofA strategists mentioned that the report’s methodology included data from major Bitcoin exchanges, including Binance, Coinbase, Coincheck, FTX, Gemini, Kraken and others.
Related: Bitcoin profitability for long-term holders drops to 4-year low: Data
“The transparency of the blockchain gives us insights into the digital asset ecosystem that are not available in traditional financial markets,” the analysts said.
The new report comes amid growing risks of global economic recession, driving more demand for the inflation hedge. Bitcoin has lost roughly 70% of its market value amid the massive crypto winter of 2022, sparking more skepticism about its status as an inflation hedge.
