This should be Bitcoin’s moment to prove itself as a safe haven asset.
US tariffs and underwhelming job figures, war in Europe and the Middle East, and political turmoil in France have ramped up macroeconomic uncertainty this week.
But as gold hits record highs, Bitcoin remains glued to the tech-heavy Nasdaq 100.
“Bitcoin’s correlation regime remains tied to risk-on assets,” analysts at Ecoinometrics, the crypto research firm, noted on X on Monday.
In short, Bitcoin’s still trading like a tech stock rather than a form of digital gold. The so-called “decoupling” hasn’t manifested.
Meanwhile, Bitcoin’s correlation with gold — the asset Bitcoin is supposed to replace — remains near zero.
Bitcoin also shows virtually no correlation with Treasury bonds, an asset that has been traditionally considered to be the safe haven during market stress, according to Ecoinometrics.
Ethereum tells the same story, maintaining an even tighter correlation with risk assets than Bitcoin.
Jerome Powell’s hands
In short, Bitcoin’s fate rests largely in Federal Reserve Chair Jerome Powell’s hands as next week’s Fed meeting becomes the only trade that matters for investors.
“For the bull market to regain momentum, macro uncertainty needs to ease,” Ecoinometrics analysts said. “The best outcome would be confirmation that the Fed will stick to its rate-cut path, or even move faster.”
A hawkish surprise, by contrast, would crush both Bitcoin and tech equities, said Ecoinometrics.
Voices from both inside and outside the Fed have already called for interest rate cuts.
Fed Governor Chris Waller has been advocating for dropping rates, while last month during the Fed’s annual meeting at Jackson Hole, Powell indicated cuts could be on the table.
Right now, the CME Group’s FedWatch tool gives an 90% probability of a 0.25% cut and a 10% chance of a 0.50% cut.
Loss of risk appetite
André Dragosch, European head of research at Bitwise, sees the entire crypto complex dancing to the macro tune.
“The recent underperformance is mostly driven by the current macro environment and not micro developments,” Dragosch told DL News, pointing to a drop in both global growth expectations and risk appetite from investors.
Even so, despite these near-term headwinds, Dragosch points to one bullish factor: global liquidity.
“Due to the ongoing acceleration in global liquidity growth I still remain very bullish over the medium to long term,” he said. “Further rate cuts by the Fed and continued easing in financial conditions will most likely lead to a benign market environment.”
But there’s a catch: “There might still be some downside potential left in the short term.”
Next week’s Fed meeting has become a binary event for Bitcoin. Cut aggressively, and risk assets rally. Disappoint dovish expectations, and risk dragging Bitcoin lower alongside tech stocks.
Pedro Solimano is DL News’ Buenos Aires-based markets correspondent. Got at a tip? Email him at psolimano@dlnews.com.
