Bitcoin Shines Amid Wall Street Losses

Bitcoin decoupled from traditional markets in May, rising more than $3,000.

The cryptocurrency, currently at $8,300 on Bitstamp, is set to end higher for the fourth straight month with 60 percent gains. That is the longest monthly winning streak and the biggest monthly gain since August 2017.

Notably, the leading cryptocurrency by market value has put on a good show despite the losses on Wall Street. The S&P 500 index – a benchmark for global equity markets – is on track to end May with a 6 percent loss.

Other riskier assets – the ones which are sensitive to economic growth prospects – are also flashing monthly losses, as seen below.

Both copper and brent oil, the barometers of global economic activity, have dropped 9 percent and 11 percent, respectively this month. The Chinese Yuan has also shed 2 percent.

Investors have clearly sold risk in May, possibly due to the re-escalation of the US-China trade war and the resulting fears of a global economic recession.

The flight to safety has boded well for traditional safe haven assets. For instance, gold is reporting a 1 percent monthly gain and the US 10-year treasury yield is down 13 percent or 43 basis points (bond prices and yields move in opposite directions).

The gains in the traditional safe havens, however, appear lackluster when compared to bitcoin’s 60 percent rise. That said, it is still too early to conclude that BTC is the new safe haven.

This is due to the fact that up until now, BTC has moved mostly in line with the risk assets, as seen in the above chart. For instance, BTC is up 127 percent on a year-to-date basis. The S&P 500 and other major risk assets are also reporting year-to-date gains.

Also, BTC largely mimicked the price action in the equity markets in 2018.

BTC's reputation as digital gold will be solidified if it continues to post solid gains during bouts of risk aversion, if any, in the coming months.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin & bull image via Shutterstock; Graph data via Trading View