Over the past seven days, bitcoin has surged more than 20%. That’s a bull market unto itself. It’s also one fueled by speculation that the SEC will soon approve ETFs with spot bitcoin exposure. That’s one of the most widely anticipated events in the histories of the ETF industry and the crypto space.
The long-running speculation can affect other cryptocurrency-related assets, including bitcoin mining equities. This is the asset class largely tracked by the Invesco Alerian Galaxy Crypto Economy ETF (SATO).
Hopes for a spot bitcoin ETF cut both ways. Speculation is just that, and there are no guarantees that the SEC will imminently approve such ETFs. Said another way, bitcoin and ETFs such as SATO could use catalysts beyond regulatory approvals. Fortunately, it appears that’s happening.
Crypto ETF SATO Could Be Golden
SATO could benefit in two ways. Recent data indicates bitcoin’s correlations to equities, including the S&P 500 and Nasdaq-100 Index (NDX), are declining. Second, the cryptocurrency’s correlations to gold are increasing.
That’s a positive, because over the past month, the largest gold-backed ETF is higher by 4.22%. Those tightening correlations could fortify bitcoin’s status as a safe-haven assets. That’s something it has long lacked, but something crypto bulls have long craved.
“Geopolitical risk amid new conflict in the Middle East has raised hackles among investors and seen traders flock into gold, long seen as a safe bet in times of turmoil that rock the stock market,” reported Jack Denton for Barron’s. “While Bitcoin has long been dubbed ‘digital gold’ by its proponents, the largest crypto has not always performed as a haven asset, though its increasing link to gold could be a sign that this is changing, especially with respect to geopolitical risk.”
Bitcoin’s emerging status as an alternative asset is useful on multiple fronts. Not only does it make bitcoin easier to classify for novice investors, it could bolster the digital currency’s status as a safe haven amid rampant inflation and geopolitical volatility.
“We [view]bitcoin as an investment being a non-sovereign store of value which had potential exposure to economic and internet growth, whilst being largely uncorrelated to other asset classes,” according to CoinShares. “We also find that in the context of a portfolio, it behaves in a similar manner to other alternative assets in providing diversification, with the exception that its portfolio diversification benefits are far greater than its competitors.”
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