CRYPTO: Why is Bitcoin falling if it’s a ‘Safe Haven’ asset

Why is Bitcoin falling if it’s a ‘Safe Haven’ asset

The last few days haven’t been great for Bitcoin, to say the least. Since 19 September, BTC has dropped by as much as 18.15% on the charts, with some minor recoveries unfolding at press time. While the market looked deprived of bullish momentum towards the beginning of September, the collapse over the past few days has taken the community by a little bit of surprise.

However, it isn’t only the digital asset industry that is suffering from a decline since major traditional stocks fell sharply too.

Many suspect that the market may have spilled over Evergrande’s troubles in China. What of Bitcoin, then, especially when it’s still competing to be the premier store of value?

Bitcoin – Acting like a Risk Asset?

Source: Arcane Research

Even though Bitcoin is touted as a safe haven asset, during increasing macroeconomic risk, the collective digital asset industry drops alongside the largest crypto.

A similar outcome was observed over the past few days, with Bitcoin becoming more correlated with the major energy and tech stocks.

Source: Skew

Additionally, data from Skew suggested that Bitcoin aligned with the S&P 500 to a new high as the 1-month correlation index hit 57%. In doing so, it surpassed its previous 2021 high. To make matters sourer, Gold performed extremely well over the past week.

The precious commodity acted as a requisite “safe haven” asset, preserving its valuation amidst collective market drawdown. In fact, it even gained by a minor 0.52% at the same time.

So. is Gold still a better Store of Value?

Gold was ‘never’ not an SoV asset, but the argument has always been that Bitcoin is slowly turning out to be a better one. At the moment, Bitcoin’s characteristics as a risk asset indicate that the digital asset is still developing its intrinsic value. And, to be fair, the comparison has been made on a really temporary basis.

Amidst global market turmoil, Bitcoin continues to face more volatility simply because the asset has reached a distribution level that is attached with Gold and its large market cap.

Plus, the latest sell-off was largely spot-driven. Hence, there is also the possibility that Bitcoin will recover faster on the charts, just like it did in 2020.

Time is the main narrative for Store of Value

Gold and Bitcoin will continue to co-exist in the market over the next few decades. Over the long term, it will be more viable to define whether Bitcoin or Gold is a better store of value. It is also important to note that over a period of 1 year, Bitcoin increment values have been far superior to Gold’s decremental returns.

It is about picking battles at the right time, and at the moment, Gold has a temporary upper hand.

This article was first written on yusmid.com


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