President Donald Trump's trade war has introduced significant volatility to financial markets since March, urging investors to chase after assets they believe will provide hedges in this turbulent environment.
The clear: Bitcoin (BTC) is not one of them, but disappointing bulls who have long considered the biggest cryptocurrency as digital gold as a valuable storage or haven investment. In reality, since the start of the trade war, Bitcoin has been more closely correlated with the Australian Dollar-Yenpea (AUD/JPY), a risk barometer in the forex market.
TradingView data shows that the 90-day correlation coefficient between Bitcoin and the AUD/JPY pair was positive in late February, making it the highest hit since November 2021.
Bitcoin and Gold, Australian Dollar – Rate (TradingView)
Correlation of 0.80 – The maximum value is considered 1-strong, meaning that the two variables, BTC and AUD/JPY, are closely related in motion in the same direction.
In contrast, the 90-day correlation between Bitcoin and gold inversion negative in late February has since dropped to -0.80, above the minimum -1. This means that the two are closely related to movement, but in opposite directions.
BTC, Proxy for Risk
It is sensitive to China and the housing currency of the goods exporting country is considered a risk currency. As Japan is a net international creditor with interest rates of near zero for decades, the yen is a safe haven.
As global markets are optimistic and product demand rises, AUD usually reflects a higher advantage in the risk of investors and the yen falling. The opposite applies when it comes to risk aversion.
Therefore, traders monitor AUD/JPY as a risk indicator, viewing upward trends as a positive indication of risky assets such as stocks, and vice versa. Bitcoin, which had already emerged in comparable roles, strengthened its position. Correlation data show that BTC is as risk-feeling proxy as AUD/JPY.
