Bitcoin-Gold Correlation Turns Negative as Market Slides into Bearish Phase: CryptoQuant

Bitcoin (BTC) price has entered a bearish phase, due to the asset’s steady decline and movement within a narrow range. As a result, the largest cryptocurrency has decoupled from gold.

According to CryptoQuant analysts, bitcoin price is falling while the yellow metal has hit new record highs, which has turned their correlation negative.

Bitcoin Decouples From Gold

The negative correlation between bitcoin and gold reflects a risk-off environment in which investors prefer traditional safe-haven assets over speculative assets like cryptocurrencies. As bitcoin decouples from the metal, the crypto asset is moving in the same direction as the US stock markets decline. Analysts said this is a sign that macroeconomic headwinds are affecting bitcoin.

Since the beginning of July, the Nasdaq 100 Composite Index has fallen by 10% and BTC has fallen by 16%, with their correlation dropping from -0.85 to 0.39. CryptoQuant has repealed that this positive correlation between Bitcoin and the Nasdaq Index is normal; therefore, BTC would be negatively affected by a stock market decline.

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

More fixes coming?

Bitcoin’s fall has led to a decline in its valuation indicators. CryptoQuant’s Bull-Bear Market Cycle indicator entered the bearish phase on August 27, when BTC was hovering around $62,000. The asset was worth $57,880 at the time of writing. As the indicator remains in this phase, analysts do not expect a significant recovery and the market faces risks of further correction.

Moreover, the current situation of bitcoin has been observed twice in the past. The asset experienced 30% corrections in March 2020 and May 2021, while the bull-bear market cycle indicator remained in the bearish phase.

Additionally, 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.

At the same time, bearish signs for bitcoin are showing up in spending by long-term holders of the asset, who are making lower profit margins. This is evidence of a lack of new demand for bitcoin.