Bitcoin’s Correlation With Gold Turns Negative as Market Slips Into Bear Phase: CryptoQuant

The price of bitcoin (BTC) has entered a bearish phase, stemming from the asset’s constant decline and range-bound movement. As a result, the largest cryptocurrency has decoupled from gold.

According to CryptoQuant analysts, bitcoin’s price has been declining while the yellow metal has rallied to new record highs, causing their correlation to turn negative.

Bitcoin Decouples From Gold

The negative correlation between bitcoin and gold reflects a risk-averse environment where investors prefer traditional safe-haven assets over speculative ones like cryptocurrencies. While BTC is decoupling from the metal, the crypto asset has been moving in the same direction with lower United States stock markets. Analysts said this is a sign that macro headwinds are affecting BTC.

Since early July, the Nasdaq 100 Composite index has fallen 10%, and BTC has plummeted 16%, with their correlation increasing from -0.85 to 0.39. CryptoQuant repealed that this positive correlation between bitcoin and the Nasdaq index is normal; hence, BTC would be negatively affected by a decline in the stock market.

Bitcoin is also moving in the same direction as the U.S. dollar, which has weakened against other currencies. According to CryptoQuant, a weakening dollar and a declining BTC could indicate broader financial stress or risk aversion when global markets face uncertainty. This causes investors to flee from the USD and riskier assets.

Further Correction Incoming?

Bitcoin’s descent has caused its valuation metrics to turn bearish. CryptoQuant’s Bull-Bear Market Cycle Indicator entered the bear phase on August 27, when BTC hovered around $62,000. The asset was worth $57,880 at the time of writing. As the indicator stays in this phase, analysts are not expecting a significant rally, and the market faces risks of further correction.

Moreover, bitcoin’s current condition has been seen on two separate occasions in the past. The asset witnessed 30% corrections in March 2020 and May 2021, while the Bull-Bear Market Cycle Indicator remained in the bear phase.

In addition, bitcoin’s Market Value to Realized Value (MVRV) ratio has been below its 365-day moving average since August 26, signaling a risk of further price correction.

Meanwhile, bitcoin’s bearish signs can be seen in the asset’s long-term holders’ spending at lower profit margins. This is evidence of a lack of fresh demand for BTC.