A recent report by the New York Digital Investment Group (NYDIG) revealed a significant shift in Bitcoin’s market behavior. The research shows that the leading cryptocurrency is forming a new pattern of movement that is not in line with risk assets. At a time when the S&P 500 index was showing declines and traditional safe-haven assets, such as the U.S. dollar and 10-year Treasury bonds, were also losing ground, Bitcoin showed strong gains.
A grand experiment with unknown consequences
Market volatility caused by geopolitical turmoil and economic uncertainty has caused investors to question the reliability of the US dollar as a benchmark for “risk-free” investing. The New York Digital Investment Group notes that the U.S. is currently undergoing a significant experiment in several areas simultaneously – trade, immigration, fiscal spending, and deregulation – the results of which are difficult to predict.
Analysts at New York Digital Investment Group emphasize that the next four years will be accompanied by structurally higher volatility. Data shows a jump in volatility in equities (VIX index), currencies (CVIX index), and interest rates/bonds (MOVE index), and it is unlikely that these indicators will return to previous low levels.
Bitcoin as a new defensive asset
What’s particularly interesting is that since “Liberation Day” on April 2, a new picture of defensive assets has begun to emerge that includes Bitcoin. According to the report, the first cryptocurrency has begun to behave more like the non-sovereign store of value that it inherently is.
| Asset | Since election | Asset | Since inauguration | Asset | Since ‘Liberation Day’ |
|---|---|---|---|---|---|
| Bitcoin | 34.7% | Bitcoin | -10.7% | Bitcoin | 7.6% |
| Gold | 19.0% | Gold | 20.2% | Gold | 4.6% |
| Swiss Franc (vs USD) | 3.9% | Swiss Franc (vs USD) | 10.2% | Swiss Franc (vs USD) | 6.2% |
| US Dollar (vs Basket) | -2.0% | US Dollar (vs Basket) | -6.7% | US Dollar (vs Basket) | -3.3% |
| US Long Term Treasuries | -2.9% | US Long Term Treasuries | 1.7% | US Long Term Treasuries | -4.0% |
New York Digital Investment Group’s comprehensive analysis shows a general trend – investors avoided pro-cyclical and U.S.-related assets. Among equities, either non-U.S. equities (developed and emerging markets) or defensive sectors of the U.S. equity market performed relatively well. Meanwhile, fixed income instruments performed better than equities, and gold outperformed commodity baskets, including energy and agriculture.
Limited options to avoid macroeconomic uncertainties
As outlined in a report by New York Digital Investment Group, there are surprisingly few large and liquid options for investors looking to avoid the impact of geopolitical factors. All fiat currencies are pegged to sovereign states, and even the Swiss franc has at times been subject to intervention by the Swiss National Bank.
Analysts specifically note that Bitcoin is the only leading crypto-asset that focuses entirely on monetary or stored value functions, while other cryptocurrencies are better described as fuel for decentralized application platforms.
Key events of the week
Nevertheless, the resilience of Bitcoin’s momentum will face several important tests this week. The release of key macroeconomic data and corporate reports could prove crucial in determining whether Bitcoin’s “upward only” trajectory continues.
- Tuesday: JOLTS (Job Openings and Labor Turnover Report) data on open jobs
- Wednesday: preliminary US GDP, US labor cost index, Microsoft (MSFT) and Meta (META) financial reports
- Thursday: US jobless claims data, ISM manufacturing purchasing managers index, Apple (AAPL) and Amazon (AMZN) financial reports.
- Friday: non-farm payrolls report (NFP), unemployment rate
The bottom line
Growing uncertainty in the geopolitical and economic landscape, as New York Digital Investment Group points out, is undermining established notions of security and means of preserving value.
With few globally accessible, large, and liquid alternatives outside of traditional financial systems, investors are turning to Bitcoin, which is beginning to fulfill its original purpose as a non-sovereign means of preserving value.
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Source:: Bitcoin as a Safe-Haven: New York Digital Investment Group Report