Bitcoin Trading More Like A Speculative Asset Than A Store Of Value, Report Says

According to a recent report by Bitfinex, Bitcoin (BTC) remains range-bound between $91,000 and $102,000 amid heightened geopolitical uncertainty fuelled by US trade tariffs on countries such as Canada, China, and Mexico. The report highlights that latest trends suggest BTC is increasingly behaving like a risk-on asset rather than a traditional store of value.

Bitcoin Behaving Like A Risk-On Asset

BTC has been in a consolidation phase for over 75 days, hovering around the mid-$90,000 range after tumbling from a new all-time high (ATH) of $108,786, recorded on January 20. At the time of writing, BTC’s total market capitalization is $1.92 trillion.

The prolonged consolidation phase underscores Bitcoin’s increasing maturity as an asset. Additionally, BTC’s annualized realized volatility has hit an all-time low. However, despite these signs of stability, the report argues that Bitcoin behaves more like a risk-on asset.

For instance, BTC’s correlation with the S&P 500 remains elevated, while its relationship with gold has weakened. On a year-to-date basis, Bitcoin has gained 3.5%, significantly lagging behind gold’s 9% increase, which propelled the precious metal to a new ATH of $2,880 per ounce.

From a market capitalization perspective, gold has added $1.5 trillion in value this year, dwarfing BTC’s relatively modest $66.5 billion increase. According to the report, this divergence is largely driven by institutional and sovereign wealth fund purchases favoring gold over BTC due to concerns about Bitcoin’s higher volatility and regulatory uncertainty.

On the other hand, Bitcoin exchange-traded funds (ETFs) have experienced strong demand since their launch in the US in January 2024. Data from SoSoValue shows that spot BTC ETFs now hold a total of $114 billion in net assets. However, capital inflows into BTC ETFs remain volatile, dictated mainly by shifting market sentiment.

Long-Term Store Of Value Narrative Remains Intact

Despite BTC getting outshined by gold’s recent rally, the long-term store of value narrative associated with ‘digital gold’ remains intact. The report highlights factors like central banks increasing monetary supply – coupled with fiat devaluation risks – to strengthen BTC’s fixed supply narrative.

In the near term, Bitcoin is expected to trade within a tight range, with potential downside pressure if macroeconomic conditions deteriorate. However, favorable policy developments – such as discussions around the US creating a strategic Bitcoin reserve – could bolster BTC’s long-term outlook.

Further, multiple US states like Kentucky, Kansas, Florida, and South Dakota are already making strides in establishing their own BTC reserves, bolstering the digital asset’s store of value narrative. At press time, BTC trades at $97,015, down 0.2% in the past 24 hours.