As Bitcoin’s correlation with U.S. equities weakens, the world’s largest digital asset is poised to become a low-risk investment option, defying pundits’ predictions and embracing its role as a safe haven.
Bitcoin’s Potential Evolution into a Low-Beta Equity Play
Bitcoin (BTC), the world’s largest digital asset by market value, has recently held steady despite President Donald Trump‘s trade war sparking a shift away from U.S. assets. This decoupling has reinforced the belief of crypto advocates that BTC is a safe haven and a low-beta play relative to equities.
Bitcoin is a decentralized digital currency that operates independently of central banks and governments.
Created in 2009 by an anonymous individual using the pseudonym Satoshi Nakamoto, it uses cryptography for secure financial transactions.
Bitcoin's network relies on a peer-to-peer system, allowing users to send and receive funds without intermediaries.
The total supply of bitcoin is capped at 21 million coins, with new units created through a process called mining.
The Self-Fulfilling Prophecy
According to BlackRock‘s Head of Digital Assets, Robert Mitchinik, it makes no fundamental sense for bitcoin to become a permanent low-beta play reflexively. However, when this idea is repeated enough, it can actually become self-fulfilling. This phenomenon occurs because pundits and research outlets have consistently predicted that BTC would behave in such a manner.
Decoupling from U.S. Equities
The recent decoupling of BTC from U.S. equities has been attributed to the transfer of BTC from less stable hands to more long-term fundamental-driven holders. Mitchinik believes this shift is ‘definitely happening‘. The institutionalization of BTC after the Covid crash in 2020 and since the debut of ETFs early last year has led to the cryptocurrency developing correlations with tradfi assets, mainly the Nasdaq index.
Weakening Correlations
Jan van Eck, CEO of VanEck, stated that traders would be more inclined to hold BTC if correlations continue to weaken. This sentiment is in line with the crypto community’s belief in an asset known to be detached from economic, political, and monetary risk of a particular country.
Capital Inflows into U.S.-Listed Spot ETFs
The recent decoupling has led to a surge in capital inflows into U.S.-listed spot ETFs. Investors have poured in at least $3 billion in the last ten trading days, with BlackRock‘s IBIT receiving the most inflows, according to data source Farside Investors.
A Shift towards Long-Term Holders
The shift towards long-term fundamental-driven holders is a significant development for BTC. This trend has been reinforced by the decoupling from U.S. equities and the institutionalization of the asset after the Covid crash in 2020.
Conclusion
Bitcoin‘s potential evolution into a low-beta equity play reflexively is a phenomenon that has gained traction in recent weeks. The decoupling from U.S. equities, capital inflows into U.S.-listed spot ETFs, and the shift towards long-term holders all support this idea. As pundits and research outlets continue to predict this outcome, it may become self-fulfilling, leading to a permanent low-beta play for BTC.
