Bitcoin’s Correlation With Gold Turns Negative Amid Bear Market: CryptoQuant Analysis
The cryptocurrency market has been experiencing a significant downturn, with Bitcoin (BTC) entering a bearish phase characterized by constant decline and range-bound movement. As a result, the correlation between Bitcoin and gold has turned negative, according to analysts at CryptoQuant.
Bitcoin’s Decoupling From Gold
While Bitcoin’s price has been on a downward trend, gold has been rallying to new record highs, causing the correlation between the two assets to shift. This negative correlation suggests a risk-averse environment where investors are opting for traditional safe-haven assets like gold over speculative investments such as cryptocurrencies.
In addition to decoupling from gold, Bitcoin has been moving in tandem with the lower United States stock markets, indicating that macroeconomic factors are influencing the cryptocurrency’s performance. The recent 16% decline in BTC’s price mirrors a 10% drop in the Nasdaq 100 Composite index since early July, with their correlation increasing from -0.85 to 0.39.
Impact of US Dollar Weakening
Furthermore, Bitcoin’s correlation with the U.S. dollar has also been a factor in its recent price movements. As the dollar weakens against other currencies, Bitcoin’s value has declined, signaling broader financial stress and risk aversion in global markets. This trend has led investors to seek refuge in traditional safe-haven assets and flee from both the USD and riskier investments like cryptocurrencies.
Potential for Further Correction
The bearish phase in Bitcoin’s valuation metrics is a cause for concern among analysts. The Bull-Bear Market Cycle Indicator, which entered the bear phase on August 27 when Bitcoin was trading at $62,000, has continued to signal a lack of significant rally potential as the asset’s price hovers around $57,880.
Historical data suggests that Bitcoin has experienced similar corrections in the past, with 30% declines in March 2020 and May 2021 while the Bull-Bear Market Cycle Indicator remained in the bear phase. Additionally, the Market Value to Realized Value (MVRV) ratio has been below its 365-day moving average since August 26, indicating a risk of further price correction in the near future.
Analysis of Long-Term Holder Behavior
Another indicator of Bitcoin’s bearish trend is the spending behavior of long-term holders, who are selling their holdings at lower profit margins. This lack of fresh demand for Bitcoin suggests a potential lack of confidence in the cryptocurrency’s future performance, further contributing to its downward price trajectory.
In conclusion, the negative correlation between Bitcoin and gold, coupled with the impact of weakening stock markets and the U.S. dollar, paints a challenging picture for the cryptocurrency in the current market environment. As analysts warn of further correction risks and indicators point to ongoing bearish trends, investors are advised to proceed with caution in their cryptocurrency investments.
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