BofA Strategists: Bitcoin is being proliferated by investors as "safe haven" considered – correlation with gold

• Bitcoin will lose value in 2022 in line with stock markets
• Correlation of the original cyber currency gold increases
• BofA: Investors are beginning to view Bitcoin as a “safe haven”.

Bitcoin: risk asset or “safe haven”?

Cryptocurrencies are generally known for their high volatility – including the oldest and largest cryptocurrency by market capitalization, Bitcoin. Bitcoin has increased in value significantly since it was launched. In 2017, it temporarily reached a high of almost 20,000 US dollars before losing significantly in value again. It hit new highs in 2021, climbing to more than $60,000 in the spring and hitting a new all-time high of almost $70,000 in November. However, he is now a long way from this: Bitcoin currently costs around 16,500 US dollars (as of November 10th, 2022).

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However, the crypto veteran is not only known as a risk asset. There have also been times when Bitcoin was traded as “digital gold” and a so-called “safe haven” due to its limited circulation volume – to which investors like to flee in uncertain times. While Bitcoin has historically been more correlated with stock markets, and the digital coin has behaved more like a risk asset than an inflation hedge, according to Bank of America, Bitcoin could soon become a haven for investors again.

BofA: Investors might consider bitcoin a relatively safe haven

As Bloomberg reports, the 40-day correlation of Bitcoin and the Philadelphia Gold and Silver Index (XAU) was recently around 0.50 – compared to around zero in mid-August. The correlations with the market-wide US index S&P 500 and the tech index NASDAQ 100 are higher at 0.69 and 0.72 respectively, but have leveled off and are below the record values ​​of a few months ago.

Bank of America strategists Alkesh Shah and Andrew Moss see this as a sign that Bitcoin could become a safe haven: “A slowing positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that Investors may view Bitcoin as a relatively safe haven as macro uncertainty lingers and a market bottom is yet to be seen,” Bloomberg quoted the strategists as saying.

Crypto bull Mike Novogratz bullish

Bank of America strategists are not alone in their assessment. As Investing.com reports, recent comments from crypto bull and Galaxy Digital CEO Mike Novogratz align with what BofA strategists are saying. Speaking at the C4K Investor Conference on Oct. 20, he stated that Bitcoin will be the “canary in the coal mine” alongside gold and will rally ahead of other tokens. And according to Bloomberg, Lauren Goodwin of New York Life Investments also explained that Bitcoin and gold could both be perceived as a hedge against the central bank.

Editorial office finanzen.ch

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