Netizen Premium | Bitcoin Deep Dive #10

Is Bitcoin Finally Acting Like An Uncorrelated Safe-Haven Investment?

Pay Attention When Historical Correlations Breakdown

Despite increasing pressure from President Trump to ease monetary conditions and cut interest rates, Fed Chair Powell maintained a decisively hawkish stance during his April 16 Economic Club of Chicago speech, even as growth concerns mount due to tariffs, immigration policy changes, and potential budget cuts. Asset markets continue to remain in DEFLATION, while leading macroeconomic data suggests we're headed for STAGFLATION – both RISK-OFF regimes for stocks and crypto. As a reminder: since markets switched to RISK-OFF in early March, the S&P 500 (-10%) has significantly underperformed Global Equities (-1%), Bitcoin (+0%), and Gold (+15%), signaling significant capital flight from U.S. assets. This outflow reflects growing recognition of America's precarious position with twin fiscal and current account deficits totaling -11% of GDP, financed through an unsustainable $24 trillion net international investment deficit—more than two-thirds of U.S. GDP. Powell's priority is defending the US Dollar against a potential balance of payments crisis rather than stimulating growth - mirroring the playbook of emerging market central banks in a currency crisis.

TLDR: Bitcoin's resilience during this capital flight suggests it's increasingly viewed as a hedge against instability in the global reserve currency itself.

Our quantitative indicators reveal a telling divergence across major asset classes that reinforces the capital flight narrative. Gold maintains BULLISH momentum while the S&P 500 remains firmly BEARISH, with Bitcoin now back at NEUTRAL. In addition, Crude Oil and Commodity Producers are now BEARISH, reinforcing the DEFLATION market regime. Most significantly, the US Dollar is causing us significant concern: while price action is clearly bearish, USD volatility is curiously breaking higher—inverting their historically positive correlation. This breakdown in correlation signals a fundamental regime change in global capital flows as investors reassess America's rank in the global monetary order. In addition, Bitcoin's 6-month beta to the S&P 500 has compressed dramatically to just 1.0, well below the typical 1.5-3.0 range we would expect during risk-off periods, while Gold maintains its traditional defensive beta of 0.2. This convergence between Bitcoin and traditional safe haven behavior suggests BTC is increasingly participating in the flight from US financial assets rather than following previous risk-on/risk-off cycles.

TLDR: Bitcoin's compressed correlation to equities suggests it's functioning as a capital flight destination rather than a risk asset.

The policy landscape ahead presents both bull and bear cases for Bitcoin as the US faces a growing threat to its monetary framework. With the US government spending $1.1-1.2 trillion annually on interest payments, rising yields could force the Fed into contradictory actions: raising rates to defend the US Dollar while simultaneously implementing QE to stabilize the Treasury market. Both Bitcoin and gold stand to benefit from this extraordinary monetary conflict as investors seek hedges against currency devaluation and treasury market instability. The bond market recently sent the Trump administration a clear warning through elevated volatility – signaling that America lacks the presumed leverage in dictating global trade terms. Foreign central banks have reduced their Treasury holdings from 40% in 2008 to just 14% today, creating a dangerous supply-demand imbalance that threatens America's financing capabilities. While markets usually trade off of earnings, expectations, and economic data, we think everything currently hinges on policy direction - both the Trump Administration's policies, Fed decisions, and evolving geopolitical relationships.

TLDR: Bitcoin and gold offer protection against a potential Fed policy contradiction of simultaneous rate hikes and QE that would accelerate investment in non-sovereign assets.

With Bitcoin's direction hinging mostly on policy decisions from the Trump Admin and Fed, let's take a look at what's going on on-chain and underneath the hood so we can better position amid the uncertainty: