The shifting relationship between Bitcoin and US equities is prompting inquiries regarding its function as a global safe-haven asset during times of financial turmoil.
Bitcoin (BTC) displayed a robust negative correlation with the US stock market when considering the short-term, seven-day trailing correlation, as indicated by recent findings from blockchain data provider RedStone Oracles, released exclusively to Cointelegraph.
Nonetheless, RedStone indicated that the 30-day metric showcases a “variable correlation” between Bitcoin prices and the S&P 500 index, with the correlation coefficient fluctuating between -0.2 to 0.4.
This unpredictable correlation implies that Bitcoin “doesn’t reliably act as a true hedge for equities,” due to its insufficient strong negative correlation below -0.3, which is essential for “effective counter movement during market stress,” the report noted.
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According to the research, while Bitcoin may not serve as a reliable hedge against declines in the stock market, it does provide utility as a portfolio diversifier.
This shifting dynamic suggests that Bitcoin frequently moves independently from other assets, potentially delivering extra profits while other assets are underperforming. However, Bitcoin has yet to reflect the safe-haven characteristics of gold and government bonds, RedStone indicates.
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Bitcoin must “mature” before detaching from the stock market
Although Bitcoin is set to develop into a safe-haven asset in the forthcoming years, the pioneering cryptocurrency still requires to “mature” as a global asset, as articulated by Marcin Kazmierczak, co-founder and chief operating officer at RedStone.
“Bitcoin still needs to mature before detaching from stock markets,” Kazmierczak informed Cointelegraph, elaborating:
“Increased institutional acceptance will certainly assist — we’re already observing this impact with corporate treasury investments diminishing Bitcoin’s 30-day volatility and with BlackRock consistently endorsing BTC as an asset in a portfolio.”
In the meantime, Bitcoin will gain increasing acknowledgment as a portfolio diversifier, boasting an annualized return exceeding 230% over the past five years, which has “substantially outperformed” both stocks and traditional safe-haven assets, Kazmierczak stated, adding that “even a modest 1–5% Bitcoin allocation can significantly improve a portfolio’s risk-adjusted returns.”
Simultaneously, Bitcoin’s decreasing volatility underscores BTC’s advancing maturity as a global financial asset. Bitcoin’s weekly volatility reached a 563-day low on April 30, a development that may indicate more stable price movement.
Bitcoin’s price volatility has fallen beneath the realized volatility of the S&P 500 and the Nasdaq 100, indicating that investors are increasingly viewing Bitcoin as a long-term investment vehicle, Cointelegraph reported on May 13.
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