Bitcoin’s designation, its function, and how it has been perceived through its 10-plus years has been incredibly dynamic and fluid. That has not always been to its advantage. The coin started out, primarily, as a currency for the dark web, but has grown to become one of the best performing assets of the last decade.
It was Bitcoin’s price volatility, which has predominantly been in an upward trajectory, that saw people move away from wanting to spend the digital asset and rather looking to hold onto it, or invest in it. Bitcoin quickly became digital gold.
That is not to say that the original narrative, as spelled out by Satoshi Nakamoto himself, is not still present. Many in the cryptocurrency space feel that the true nature of Bitcoin is as an electronic cash system.
This has seen Bitcoin Cash spring forth, and even more recently, Bitcoin SV, as ways to try and keep Bitcoin more cash-like than a digital gold. However, for the main coin, investors have been much happier holding on in the hopes of the now typical price surges.
However, the sentiment that Bitcoin is a digital gold may actually be waining for a few reasons. According to some metrics, it appears as if the points that made Bitcoin a digital gold are starting to fade.
It must be remembered that in investment terms, gold has always been seen as a safe haven asset, and one where people can move their money into when there is financial market turmoil. Bitcoin, at a stage when a US-China trade war was brewing, seemed to fit that bill, but not so much any more.
Looking at the graphs, we can even see that Bitcoin’s price showed a modestly negative correlation with the S&P 500. In other words, the coin tended to rise on days when the bellwether stock-market index fell, and vice versa.
However, since October, there has been a break in this negative correlation. The correlation, once well into the negative 20-30 range, is now beginning to flatten towards a reading of around negative 10 percent, as shown in the chart from Digital Assets Data.
“The negative correlation has supported the store of value/digital gold thesis for BTC as investors may have been moving into the asset as a hedge against global economic turmoil,” said Kevin Kaltenbacher, Data Scientist of Digital Assets Data. “These recent developments potentially present some challenges to that narrative.”