Bitcoin Correlation With Gold Turns Negative As Market Enters Bearish Phase – CryptoQuant

The price of bitcoin (BTC) has entered a bearish phase, due to the constant decline of the asset and the movement of the range. As a result, the largest cryptocurrency has become decoupled from gold.

According to analysts at CryptoQuant, the price of bitcoin has been declining while the yellow metal has climbed to new all-time highs, causing their correlation to turn negative.

Bitcoin is decoupled from gold

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

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

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

More correction coming in?

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

Also, the current state of bitcoin has been seen on two separate occasions in the past. The asset experienced 30% corrections in March 2020 and May 2021, while the bull market cycle indicator remained in a bearish phase.

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

Meanwhile, bitcoin’s bearish signs can be seen in long-term spending by holders of the asset with lower profit margins. This is proof of the lack of new demand for BTC.

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