President Donald Trump’s trade war has introduced considerable volatility in the financial markets since March, causing investors to hunt assets they believe provide a hedge in this turbulent environment.
What is clear: Bitcoin (BTC) is not one of them, much to the dismay of bullish investors who have long thought of the biggest cryptocurrency as a digital gold either as a store with value or a garden investment. The reality is that since the beginning of the trade war, Bitcoin has become closer correlated with the Aussie Dollar-Yen-Paret (AUD/JPY), the Currency Market risk barometer.
Data from TradingView shows the 90-day correlation coefficient between Bitcoin and Aud/JPY pair tilted positively at the end of February and has since hit the highest since November 2021. Tit-for-Tat-Tariff War between the two nations has led to a dizzying stimulation of 245% cumulative Levy on the Chinese import to the United States, which led to the federal reserve. Jerome Pow-Pow, which reiterates it supports on Wednesday.
The correlation of 0.80 – the maximum value is 1 – is considered strong, suggesting that the two variables, BTC and AUD/JPY, are closely linked in their movements in the same direction.
In contrast, Bitcoin’s 90 -day connection with gold flipped negatively at the end of February and has since fallen to -0.80, just over the minimum -1. This means that the two are closely linked in their movements, but in opposite directions.
BTC, a proxy to risk
The Australian dollar, which is China-sensitive and the home currency of a commodity export, is seen as a risk balance. Yen is a safe harbor because Japan has been a net international creditor for decades with almost zero interest rates.
When the global markets are optimistic and goods demand rises, Aud typically appreciates, reflecting a higher risk appetite among investors and yen drops. The opposite applies when they become risk -aven.
Dealers therefore monitor AUD/JPY as a risk indicator that considers appearance as positive signs of risk assets such as stocks, and vice versa. Bitcoin, already emerging in a comparable role, has strengthened its position. The correlation data indicates that BTC is now as much a power of attorney for risk duty as AUD/JPY.
