BofA says Bitcoin will not be a superb retailer of worth or inflation hedge so long as it trades extra like shares than gold.
Bitcoin’s correlation to shares has elevated considerably since its peak in November 2021 and at the moment trades extra like a danger asset that its reference as digital gold, analysts at Financial institution of America stated on Wednesday.
In keeping with Alkesh Shah, a lead analyst on the US banking large, Bitcoin’s rising lockstep buying and selling with shares has eliminated the profit the cryptocurrency had for traders as a hedge towards inflation.
Volatility, Shah stated in a word from the financial institution, meant it’s now not buying and selling alongside conventional hedge belongings reminiscent of gold.
As such, the BofA analyst means that the flagship cryptocurrency is unlikely to achieve traction, in present circumstances, as a retailer of worth.
Insider quotes the Financial institution of America strategist as saying that correlation between Bitcoin and gold has shrunk to near-zero ranges. In the meantime, the crypto asset has seen the correlation with shares surge to all-time highs throughout final month’s market sell-off.
And with Bitcoin buying and selling in lockstep with the Nasdaq 100 and the S&P 500, it is anticipated the digital gold would proceed to lose its attraction as a attainable ‘protected haven asset.’
BofA thus expects the benchmark crypto to guide the remainder of the digital asset market in remaining danger belongings so long as volatility stays so excessive.
Whereas the analysts see volatility in Bitcoin costs as an element prone to put traders in developed markets off, they are saying the outlook could also be totally different in creating economies. The financial institution believes these in nations affected by runaway inflation are prone to see BTC as a greater inflation hedge or retailer of worth.
Bitcoin traded to highs close to $45,000 on Wednesday to take care of its slight upside momentum after plunging greater than 50% from its peak final yr. The cryptocurrency is now 35% off that peak, whereas gold has stayed across the $1,800 per ounce stage.
Elsewhere, shares have fluctuated massively year-to-date, with Nasdaq sinking into correction in January amid rising inflation and a hawkish tilt from the US Federal Reserve.