Bitcoin, the Haven Crypto Bulls Hoped for, Is More a Barometer of Risk: Godbole

Bitcoin, often touted as a safe haven asset by cryptocurrency enthusiasts, is increasingly being viewed as a gauge for broader market risk, according to analyst Godbole. While many investors had hoped Bitcoin would serve as a hedge against economic uncertainty, its price movements now reflect shifts in global risk sentiment. This shift highlights Bitcoin’s evolving role in financial markets, where it acts less like digital gold and more like a high-beta asset sensitive to macroeconomic trends. The analysis suggests that traders should consider Bitcoin’s correlation with traditional risk assets when formulating investment strategies.

The correlation of 0.80 — the maximum value is 1 — is considered strong, implying that the two variables, BTC and AUD/JPY, are closely related in their movements in the same direction.

In contrast, bitcoin’s 90-day correlation with gold flipped negative in late February and has since dropped to -0.80, just above the minimum -1. It means the two are closely related in their movements, but in opposite directions.

BTC, a proxy for risk

The Australian dollar, being China-sensitive and the home currency of a commodity-exporting nation, is seen as a risk currency. The yen is a safe haven because Japan has been a net international creditor for decades with near-zero interest rates.

When global markets are optimistic and commodity demand rises, the AUD typically appreciates, reflecting a higher risk appetite among investors and the yen drops. The opposite holds true when they become risk-averse.

Traders, therefore, monitor AUD/JPY as a risk indicator, viewing uptrends as positive signs for risk assets like stocks, and vice versa. Bitcoin, which was already emerging in a comparable role, has strengthened its position. The correlation data indicates that BTC is now as much a proxy for risk sentiment as AUD/JPY.