New York-headquartered investment management firm, VanEck has revealed in a new report that Bitcoin’s correlation to gold has risen significantly in 2020, especially during the recent broad market sell-off caused by the COVID-19 pandemic.
According to the report published by Gabor Gurbacs, a Digital Asset Strategist at VanEck, Bitcoin’s correlation to gold has surged since the turn of the year and especially in recent weeks, further strengthening the debate the cryptocurrency is maturing as a safe-haven asset.
While the rest of the equity markets dipped in the wake of the pandemic and showed increase volatility, the VanEck analysis confirmed that a small bitcoin addition to a portfolio with 60% equity and 40% bond will record lower volatility during the recent market sell-off.
The reason for such volatility is not farfetched since Bitcoin has rebounded from the $3800 low recorded during the March 13th sell-off to record prices near $7000 at the time of writing.
Meanwhile, another takeaway from the VanEck report, is that Bitcoin’s correlation to gold in the long-term remains low. The same low correlation is noted between Bitcoin and traditional asset classes such as the S&P 500, NASDAQ, Oil, and Real Estate within the same time frame.
Despite the recent coincidental sell-off in Bitcoin and these global market, Bitcoin’s price action is largely unaffected by movement in the markets for these traditional assets.
The VanEck report also argued in line with the asset manager’s ongoing efforts to list a Bitcoin exchange-traded fund (ETF) in the United States.
While there are no such ETFs available today, “such products may have significantly reduced volatility for 60% equity/40% bond blended portfolios,” another section of the report noted.
Moving forward, the wait for the first U.S-exchange listed Bitcoin ETF continues with the Securities and Exchange Commission (SEC) continuing to turn down all applications from interested asset managers, including VanEck. The regulator as we reported cites market manipulation and custody issues as the primary reasons while such an ETF is not feasible at the moment.
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