Bitcoin is increasingly viewed as a risk indicator, correlating closely with the AUD-JPY pair amid the U.S.-China trade war, rather than fulfilling the role of a digital gold. The correlation with gold has flipped to negative, dismissing Bitcoin’s position as a haven investment. The AUD’s role as a risk asset and the yen’s safe haven status reinforce Bitcoin’s emerging role as a proxy for market risk.
Bitcoin has increasingly been identified as a proxy for risk rather than a digital safe haven, validating the perspectives of foreign exchange market participants. Recent analysis shows that Bitcoin is strongly positively correlated to the AUD-JPY rate, especially amidst ongoing U.S.-China trade tensions, confirming its role as a risk gauge in financial markets.
Currently, the correlation between Bitcoin and gold has become negative at -0.80, evidencing that the two assets now move inversely to each other. The volatility stemming from the trade war has driven investors toward what they perceive are safer assets, although Bitcoin does not fit this categorisation, leading to disappointment amongst bullish investors.
Since the trade war commenced, Bitcoin’s 90-day correlation with the AUD-JPY pair turned positive in late February and has reached the highest levels seen since November 2021. The tariff imposition on Chinese imports has put significant pressure on the economies involved, prompting caution among investors and remarks from Federal Reserve Chairman Jerome Powell regarding stagflation risks.
The robust correlation of 0.80 indicates that Bitcoin’s price movements are closely linked with those of AUD/JPY. In contrast, as Bitcoin’s correlation with gold dropped, it confirmed that while both assets are traditionally viewed through the lens of investment value, they are currently behaving in polar opposite ways.
The Australian dollar, influenced by commodity exports and sensitivity to Chinese markets, acts as a risk asset, while the yen serves as a safe haven due to Japan’s strong creditor status. The dynamics of the AUD/JPY create insights for traders seeking to gauge market sentiment, thus solidifying Bitcoin’s emerging identity as an equivalent proxy for market risk, alongside AUD/JPY.
Omkar Godbole serves as a Co-Managing Editor for CoinDesk’s Markets team, based in Mumbai. He has a master’s degree in Finance and holds a Chartered Market Technician (CMT) designation, with a professional history in research on currency markets and a focus on fundamental analysis.
