According to Godbole, Bitcoin Is Less a Safe Haven for Crypto Bulls and More a Gauge of Market Risk

Bitcoin Now a Risk Gauge, Not the Safe-Haven Investors Expected Amid Trade War Volatility

Rather than serving as the “digital gold” that many hopeful investors envisioned, Bitcoin has firmly established itself as a barometer of market risk, echoing the sentiments of foreign exchange market participants who use it to track speculative mood.

Since President Donald Trump’s trade war escalated in March, global financial markets have experienced significant volatility, prompting investors to seek assets they believe can act as safe havens in uncertain times.

However, Bitcoin (BTC) has failed to fill this role, much to the disappointment of those who once saw the largest cryptocurrency as a store of value or a protective investment. In reality, since the beginning of the trade dispute, Bitcoin has been more closely correlated with the Australian dollar-Japanese yen (AUD/JPY) pair, widely regarded as a risk indicator in the foreign exchange market.

Data from TradingView shows that the 90-day correlation between Bitcoin and the AUD/JPY pair shifted positive in late February, reaching its highest level since November 2021. This shift coincided with the intensification of the trade war, which has led to a massive 245% cumulative tariff on Chinese imports to the U.S. Federal Reserve Chairman Jerome Powell expressed concerns over the risks of stagflation on Wednesday.

With a correlation coefficient of 0.80 (where 1 is the maximum), Bitcoin and AUD/JPY are now moving in tandem, suggesting a strong relationship between the two, both reflecting investor sentiment.

In contrast, Bitcoin’s 90-day correlation with gold flipped negative in late February, now standing at -0.80, nearing the lowest possible value of -1. This indicates that, unlike before, Bitcoin and gold are moving in opposite directions.

Bitcoin: A New Proxy for Risk Sentiment

The Australian dollar, often seen as a proxy for risk due to its ties to China’s economic health and Australia’s commodity exports, tends to rise when global markets are optimistic and demand for commodities is strong. In contrast, the Japanese yen, as a safe-haven currency, tends to appreciate during periods of market uncertainty and risk aversion.

Traders monitor the AUD/JPY pair as a gauge of market sentiment, with rising AUD/JPY levels typically signaling higher investor risk appetite, which benefits riskier assets like stocks. Bitcoin, increasingly moving in tandem with this pair, has now solidified its role as a market sentiment indicator—showing just how closely it aligns with global risk sentiment.