- Bitcoin and gold markets formed a strong positive correlation throughout the day for the first time since January 2020.
- The rivals in the safe haven suffered losses on Thursday as investors rushed into cash security.
- Peter Mallouk, President and Chief Investment Officer of Creative Planning, advised investors not to get involved in gold and bitcoin.
Although Bitcoin is still an uncorrelated asset, its price moves on Thursday were strikingly similar to those of its rival gold, a safe haven.
The benchmark cryptocurrency declined $ 536 or 5.31 percent to end the day at $ 9,018. The downward move was part of a more significant bearish correction that started after hitting $ 10,000 earlier this week.
Traders took advantage of local highs to take profits, a sentiment sparked on Wednesday amid rumors.
On the other hand, gold showed similar correction features after its spot price hit a seven-year high this week. The yellow metal closed 2.25 lower from its local high of $ 1,765.30 on Thursday due to the profit taking mood.
Observers found that investors returned to cash due to growing trade conflicts between the United States and China and the uncertainty about a full economic recovery.
Macroeconomic narratives had a similar impact on Bitcoin and gold, according to their recent price movements. When the cryptocurrency juggled between $ 9,500 and $ 10,000 and waited for a bullish breakout, the metal also consolidated within a strict trading area.
The last 24 hours were the strongest of their correlations for the first time since the U.S.-Iran military conflict in January 2020. Even their recoveries – they stalled – went hand in hand, confirming that global factors were involved in both the Bitcoin and gold markets.
Bitcoin & # 39; s Wall Street Exposure
The correlation arises when Bitcoin searches for its position in the broader spectrum of asset allocation. The cryptocurrency was recognized as a safe haven when the world economy with the billionaire Paul Tudor Jones and Renaissance Technologies " Flagship fund that admits having dipped its toes in the 11-year-old asset.
Prominent fund managers examined Bitcoin, although they previously polluted it for its extreme volatility. But after the corona virus pandemic caused almost every asset to become angry – even gold – Bitcoin looked like part of the Wall Street Club.
This was reflected in the positive correlation between the cryptocurrency and the S&P 500 after both suffered heavy losses in March 2020.
Recently Bitcoin decoupled from the US benchmark and joined gold. VanEck, a New York-based investment management company, said in a note that both Bitcoin and gold had a low correlation in the long term, but selling off coronaviruses did something to trigger this. Excerpts:
“Our analysis shows that the Bitcoin correlation to gold remains low in the long term. However, during the recent COVID-19 induced broad market sell-off, bitcoin correlation to gold has increased significantly. "
The recent couping of Bitcoin and gold also surfaced when a financial veteran warned investors against increasing their exposure to both assets.
Peter Mallouk, President and Chief Investment Officer of Creative Planning, an asset management company, said CNBC that bitcoin and gold are "wrong investments". He called them speculative and advised investors to bet on "incredible companies" because "they don't go anywhere".
https://www.youtube.com/watch?v=Sfy4rL_Clzs [/ embed]
Mr Mallouk's comments suggested that he expects Bitcoin and gold to disappear from the macro market scene. He has criticized safe haven assets across multiple accounts in the past.