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For the past four months, Bitcoin quotes have been moving within a wide fluctuation range of $17.6k–$25k. Over the past month, the cryptocurrency has mastered the $18.2k–$20.4k area. The consistent movement of BTC within certain areas was made possible by a decrease in trading activity.
Bitcoin tried to go beyond the ranges, but each such attempt was unsuccessful. At the same time, the drop in trading activity had a positive impact on the stability of the cryptocurrency. Thanks to the minimal attention of investors, the level of Bitcoin volatility has updated a seven-year low.
As a result, some stock indices have become more volatile than the main cryptocurrency. According to Bloomberg experts, a significant decrease in volatility has become a catalyst for increased attention to the industry by institutional investors.
Arcane Research also stated that the decline in Bitcoin's volatility has affected the asset's "relationship" with gold. The correlation of BTC and the precious metal over the past month has reached an all-time high zone. It is for this reason that the cryptocurrency holds on to the $19k level, and does not follow the stock indices.
The correlation of Bitcoin with stock indices remains, despite the passive behavior of the cryptocurrency price. Technically, Bitcoin follows the price movement of the S&P 500 and other indices, but everything happens within a narrow price range, which does not allow BTC volatility to increase.
The macroeconomic situation and the seven-year low of volatility return Bitcoin the status of digital gold. Investors look to the asset as a deflationary savings vehicle. Given that the correlation between Bitcoin and stock indices persists, the reorientation is just beginning.
In the medium term, this can significantly increase the attractiveness of Bitcoin and allow the asset to go beyond price ranges. However, along with the growing interest in cryptocurrency, the level of volatility will undoubtedly increase.
Given this, there are two possible options for Bitcoin in the medium term. While maintaining the boundaries of the wide range of $17.6k–$25k, the correlation with gold may strengthen. However, in case of multiple attempts to go beyond the area, BTC volatility will start to rise.
The growing correlation of Bitcoin with gold is situational but beneficial for the cryptocurrency. This suggests that investors are ready to consider a digital asset in various forms, including savings. Given the continuation of the Fed's hawkish policy, the correlation with gold is a positive signal.
However, it is important to understand that fundamentally nothing has changed for Bitcoin. Gold is as much an underdog in the current bear market as high-risk assets. Precious metals rise during the DXY correction, and therefore you should not count on significant dividends from the correlation with gold.
The growing correlation of Bitcoin with gold confirms the willingness of investors to use the situational strengths of the cryptocurrency. In the medium term, interest in BTC can provoke an increase in trading volumes and the achievement of local highs.
However, fundamentally the situation around the cryptocurrency does not change. In the current macroeconomic crisis, high-risk assets and precious metals are in the boat of outsiders. Given this, we can say with confidence that Bitcoin has no significant chances for a full-fledged growth before the end of the Fed's aggressive policy.
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