Despite the current cryptocurrency bear market, investors have increasingly been looking to Bitcoin (BTC) as a safe haven, a new study suggests.
The rising correlation between Bitcoin and gold (XAU) is one of the leading indicators demonstrating investor confidence in BTC amid the current economic downturn, according to digital strategists at Bank of America.
Bitcoin’s correlation with gold — often seen as a hedge against inflation — has risen this year, reaching its highest annual levels in early October.. The increasing correlation trend started on September 5 after staying near zero since June 2021 and turning negative in March 2022, BofA strategists Alkesh Shah and Andrew Moss said in the report.
“Bitcoin is a fixed-supply asset that may eventually become an inflation hedge,” the strategists wrote. The growth of the BTC/XAU pair correlation is not the only indicator pointing to the growing confidence of investors in Bitcoin as a store of value.
Bitcoin has also become increasingly correlated with major stocks like the S&P 500 (SPX) and Nasdaq 100 (QQQ). The correlation between Bitcoin and SPX and QQQ hit all-time highs on September 13, the BofA strategists wrote, adding:
“A slowing positive correlation with SPX/QQQ and a rapidly increasing correlation with XAU indicate that investors may view Bitcoin as a relatively safe haven as macroeconomic uncertainty continues and a market bottom remains to be seen.”
BofA strategists also mentioned massive outflows of Bitcoin from exchanges to personal or custodial wallets.. According to the study, BTC’s weekly exchange outflows in early October were the largest since mid-June, marking the third consecutive week of outflows. Strategists emphasized that continued large outflows to personal wallets indicate limited short-term selling pressure, stating:
“Investors transfer tokens from exchange wallets to their personal wallets when they intend to HODL, signaling a possible easing in selling pressure.”
BofA strategists mentioned that the report’s methodology included data from major Bitcoin exchanges such as Binance, Coinbase, Coincheck, FTX, Gemini, Kraken, and others.
“The transparency of the blockchain gives us insight into the ecosystem of digital assets that is not available in traditional financial markets”analysts said.
The new report comes amid growing risks of a global economic downturn, driving increased demand for inflation hedging. Bitcoin has lost close to 70% of its market value amid the massive crypto winter of 2022, prompting more skepticism about its status as an inflation hedge.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.