Yes. Bitcoin has been an uncorrelated asset last 10 yrs, but the real test is a stress situation (recession), which we haven't had since 2008, but is around the corner. This is the reason central banks don't allow for much diversification: correlation break (goto 1) during stress — PlanB (@100trillionUSD)
“So if bitcoin indeed shows a negative correlation in the next stress event (recession), then it will become difficult for central banks and governments to deny and ban,” tweeted PlanB. ‘It would also trigger a lot of institutional demand.”
Correlation Grows
The comments came as investors digest the prospects of a global meltdown event during the next year. They believe that the rising geopolitical risks, coupled with the ongoing trade tension between the US and China, would push the market into recession. Findings from Absolute Strategy Research 52 percent of investors believe in the likelihood of such an event. It was the first time since 2014 the chance over a recession went above 50 percent."shaded areas indicate US recessions" — PlanB (@100trillionUSD)
Bitcoin, on the other hand, has practiced restraint against macroeconomic risks. The cryptocurrency surged by more than 150 percent between May and August, the period which saw an escalation in the US-China trade war and depreciation in the value of China’s renminbi. That led prominent analysts to prove a growing correlation between bitcoin and global markets. Ken Xuan, a data scientist at Fundstrat, in his August note that investors were treating bitcoin as a safe-haven asset.
“The recent Bitcoin rally strengthens the argument for Bitcoin as a store of value,” he added.Others also believe that bitcoin’s correlation with the global market is positive, not negative. Data research startup CoinFi :
“During extreme events like the global recession, the correlation for the crypto market will be similar to that of traditional financial markets. That is, risky assets (ie equities, crypto) will go down together with the broader market.”
Political Intervention
Bitcoin’s growing status as a so-called safe-haven asset – nevertheless – did not sit well with politicians in the White House. A week after the cryptocurrency had just established its year-to-date high near circa $14,000, US President Donald Trump lambasted the cryptocurrency industry via his tweet, stating that he is “not a fan bitcoin” because it has no real value. Some days later, Treasury Secretary Steven Mnuchin called bitcoin “a national security issue” followed by a comment that nobody would be talking about cryptocurrencies in the next four to five years.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity…. — Donald J. Trump (@realDonaldTrump)