Bitcoin Prefers Stocks - Is “Digital Gold” Making a Comeback?

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Since bitcoin has lost about 80% of its value since its all-time high, its function as a store of value and digital equivalent of gold has been questioned. BTC still has the best performance of any asset over the past decade. However, critics only look at last year’s losses.

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That could soon change, however. Because: Bitcoin, the digital version of gold, has developed better than the traditional financial markets. BTC has even managed to keep the bears away from the current prices.

Notice

At the time of writing, BTC price is trading at $20,000, having gained 4% in the last 24 hours.

BTC price is moving sideways on the 4 hour chart. Source: BTCUSDT Trade View

Bitcoin is going down on stocks

Arthur Hayes, founder of crypto exchange BitMEX asked Data shows a growing correlation between Bitcoin and major stock indexes. As the US Federal Reserve (Fed) changed monetary policy to curb inflation, risky financial assets began to move into the green phase.

So when traditional markets collapsed, Bitcoin follows. This has been the status quo for the past several months as the US Federal Reserve becomes more aggressive and continues to push for rate hikes. That pushes stocks and BTC to new multi-year lows.

Hayes now claims that the 30-day correlation between BTC and Nasdaq is hot up and trending “in the wrong direction.” On lower time scales, however, the decoupling of the two assets is starting to emerge.

As seen below, the 10-day correlation between Bitcoin and the Nasdaq 100, one of the world’s major stock indexes, is declining – and moving down. Hayes classifies this development as “good”. He believes that once BTC and other cryptocurrencies can be traded on their own, they have the potential to outperform stocks and start another bull run.

Chart 2 Bitcoin BTC BTCUSDT, Source: Arthur Hayes via Twitter

Is BTC Price Starting A Bull Run?

As mentioned before, Bitcoin seems to be behaving as predicted. Additional data from Arcane Research shows: BTC price outperformed the stock market in September despite ongoing financial market turmoil.

As can be seen in the chart below, the leading cryptocurrency by market cap did not record any losses this month. The dominant trend was neutral and sideways. During the same period, the Nasdaq 100 and S&P 500 lost 9% and 8%, respectively.

Arcane Research comments: BTC was able to maintain its value as global markets trended lower.

“Amid this turbulent macro, gold has recovered relatively well, falling 3%, in line with Bitcoin’s performance. Over the past two years, Bitcoin has closely followed the stock market, although with higher volatility (…). Bitcoin’s recent outperformance compared to the stock market in a weak period offers some hope for investors clinging to digital gold.”

It remains to be seen whether the current bullish momentum in the price of BTC will have a bullish effect – or whether the cryptocurrency will follow traditional markets again.