(Kitco News) As Bitcoin clings to support above the $19,000 level, the world's largest cryptocurrency's correlation with gold is rising, said Bank of America (BofA). And that means that investors are using Bitcoin as a safe haven.
When analyzing market activity, BofA noted that Bitcoin's relationship to gold was noteworthy.
"A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU [gold] indicate that investors may view bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen," said BofA's crypto and digital assets strategists Alkesh Shah and Andrew Moss.
The correlation between bitcoin and gold is viewed as an inflation hedge/store of value, the strategists explained.
From Jun 2021 through February 2022, the correlation remained close to zero. In March 2022, it turned negative. In September, the correlation turned positive and continued to climb, Shah and Moss wrote in a report published Friday.
Overall, market activity in the crypto space points to "limited directional conviction as investors move to the sidelines and await macro/investor capitulation," according to the report.
The market value of the top 100 digital assets is down 3% in the last two weeks and is down 60% year-to-date.
Over the last four weeks, Bitcoin saw exchange outflows of $2.6 billion, which was 3.6 times larger than exchange inflows over the same period, the strategists said. "Exchange outflows for 3 of the prior 4 weeks (BTC +2% last 4 weeks) indicate that investors continue to HODL instead of selling into strength," Shah and Moss said.
In the last week alone, Bitcoin exchange outflows totaled $1.4 billion and were the largest since mid-June. And that means more bearish sentiment in the short-term. "Large and continuous outflows into weakness, tight supply and whale accumulation indicate limited near-term sell pressure," Shah and Moss wrote.
Bitcoin was last trading at $19,502, up 1.5% on the day but down 72% from its all-time high of $69,000 posted in November 2021.
