The start of 2021 has not been good for bitcoin as the asset has dropped more than 15% in less than two months. With this decline, the cryptocurrency has paralleled the performance of the major US stock market indices, and the correlation between the two asset classes has reached a new all-time high, according to CryptoQuant.
Bitcoin moves in line with the S&P 500
In addition to the typical COVID-19 concerns, 2022 started with more concerns, some from an economic perspective, others from a geopolitical sphere.
More precisely, the US Federal Reserve outlined plans to raise interest rates starting in March of this year, which had an immediate impact on most financial markets.
However, what is significantly more worrying is the situation in Eastern Europe and the increasing voltage between Russia and Ukraine. As the world’s largest country by land mass continues to threaten the borders of Ukraine and most Western countries led by the US and Germany willing to impose sanctions, financial markets suffer even more.
Assets normally considered riskier, such as stocks, have fallen in recent weeks. The Russian stock market crashed, but the situation is somewhat similar across the pond. This is evident when analyzing the performance of the S&P 500, following the top 500 companies trading in US markets. The popular index has dropped more than 10% since the beginning of the year.
Bitcoin, on the other hand, is trying to establish itself as a safe-haven asset, but its latest price moves suggest it is even riskier. The cryptocurrency is down around 15% since January 1 of this year.
Indeed, analyzing the performance of both — bitcoin and the S&P 500 — CryptoQuant has determined that they move in line and their positive correlation has reached a new peak.
Bitcoin and S&P 500 correlation. Source: CryptoQuant
The analytics firm’s CEO highlighted two outcomes of this conclusion. On the one hand, this means that BTC is “being adopted by traditional institutions” as its ownership is “changing by new players trading shares”. On the other hand, however, it means that “BTC is not a safe-haven asset. For a while.”
And what about gold?
When talking about safe-haven assets, one should also take a look at gold as it is traditionally considered a hedging tool. And its performance since the beginning of the year certainly supports that narrative.
While most financial assets, including those mentioned above, are in the red in the first few weeks of 2022, gold is up around 5%. As of now, gold has reached its highest price since early June 2021 at approximately $1,900/oz.
