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5 Reasons Why Bitcoin Correlation to SoV's is Incredibly Bullish

5 Reasons Why Bitcoin’s Correlation to SoV’s is Incredibly Bullish

Martin Young
by Martin Young
5 years ago
·
Posted in Bitcoin, News, News teaser
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Recent events have undoubtedly solidified the store of value sentiment for bitcoin. Its price correlation with other safe havens such as gold can be quantified and that is extremely bullish for BTC.


Crypto asset venture capitalist Andrew Kang has been delving deeper into why bitcoin’s correlation to other stores of value is a good thing.

Bitcoin has never shown much correlation to gold or other SOVs. That is, until now. This is incredibly bullish for BTC.

Bitcoin has never shown much correlation to gold or other SOVs. That is, until now.

This is incredibly bullish for BTC.

Here's Why 👇 pic.twitter.com/nyOI0Swkge

— Andrew Kang (@Rewkang) January 8, 2020

Bitcoin Market Reflexivity

This economic concept was popularized by the billionaire hedge fund manager George Soros. Kang’s take on this is that subjective beliefs of markets can influence their underlying fundamentals through increasingly stronger positive feedback loops.

In other words if we collectively believe bitcoin is a solid store of value and invest in that belief, it will become one.

Global Uncertainty

He added that the main argument for bitcoin as a store of value is a hedge against global uncertainty. We saw this last year when US president Trump escalated his trade war with China.

So far BTC has not been strongly correlated to gold, until very recently. The escalating tensions in the Middle East saw bitcoin and gold moving in tandem as the news broke.

When Trump on Live TV made it clear that de-escalation was a priority, you could see both BTC and Gold drop hand in hand.

Bitcoin Macro Event Trading

More people will start to trade bitcoin on macro events. Most large moves are driven by speculators but figures revealed that a large number of bitcoins have been hodled over the past few years, as the SoV narrative strengthens.

Macro events such as the threat of escalating military action or a global trade war will start to draw more traders into digital assets which increases their liquidity overall.

Hedging Bets

Recent economic woes, such as the FED pumping more freshly printed dollars into US financial markets, will lead investors into hedging against fiat currencies.

Day trading or hodling doesn’t really matter according to Kang as the net result is further increased correlation and thus increased belief in BTC as a store of value/macro hedge.

Feedback Loop

All of the above creates a feedback loop which will draw more capital from other safe haven assets into Bitcoin as investors diversify their portfolios.

This feedback loop will continue, causing BTC to continue to appreciate while capturing premiums from other SOVs and for enough data to be produced that even the strongest skeptics will not be able to deny BTC’s utility

Kang concluded, adding that he is extremely bullish which is a sentiment shared by many experienced traders and investors.

Will bitcoin grow as a SoV to match the status of gold? Add your comments below


Images via Shutterstock, Twitter @RewKang

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Martin Young

Martin Young

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Martin has been writing on technology for 15 years, he has a keen eye for emerging cryptocurrency news, blockchain developments, and market sentiment.

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