Bitcoin Once Again Proves to Be a Risk-On Asset Rather Than a Safe Haven

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Bitcoin Once Again Proves to Be a Risk-On Asset Rather Than a Safe Haven
USD/CHFXAU/USDS&P 500
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Market Overview Analysis by Frank Holmes covering: USD/JPY, USD/CHF, XAU/USD, S&P 500. Read Frank Holmes's latest article on Investing.com

Last Monday, global equities and digital assets underwent a dramatic selloff as the unwinding of the Japanese yen carry trade rattled markets. The S&P Global Broad Market Index , which measures the performance of more than 14,000 stocks around the world, retreated 3.3%, its worst trading day in over two years.

Following the selloff, the BOJ walked back its hawkish stance, with Deputy Governor Shinichi Uchida pledging to refrain from further rate hikes amid market instability. This should provide some relief in the near term, but the broader implications of the yen’s rebound and the carry trade unwind will likely continue to influence markets.

The selloff in Bitcoin highlights a crucial point: While it’s often touted as “digital gold,” there are some who believe the cryptocurrency has yet to prove itself as a stable store of value in times of market stress. Our own analysis adds some color to Citi’s conclusion and shows that Bitcoin has historically behaved more like a risk-on asset than a safe haven. Over the past decade, during the 10 worst months for the S&P 500, Bitcoin fell by an average of 6.4%, while gold remained slightly positive with an average return of 0.8%. During the best 10 best months, on the other hand, Bitcoin surged an eye-popping 22.4% on average, significantly outpacing gold’s 1.5%.

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