While bitcoin’s supply cap of 21 million could make it perfect to hold as an inflation hedge or store of value, the cryptocurrency has traded increasingly as a risk asset since July, Bank of America said in a research note.
Correlations on Jan. 31 between bitcoin and the S&P 500 stock index, and between bitcoin and the Nasdaq 100 index reached all-time highs, and the 99.73 percentile, respectively, analysts led by Alkesh Shah wrote Tuesday.
The correlation between bitcoin and gold, a metal that’s often treated as an inflation hedge or store of value, has stayed at close to zero since June last year, the bank noted.
The digital asset’s volatility has fallen from the highs seen in 2013, but it remains elevated relative to the S&P 500, Nasdaq 100 and gold, the report said.
The volatile price means that bitcoin is unlikely to be adopted as an inflation hedge for investors in developed countries but “individuals living in inflationary environments may view bitcoin as an inflation hedge,” the report added.
Bank of America expects cryptocurrencies to trade as risk assets until the volatility for deflationary tokens like bitcoin falls.
Read more: Excessive Volatility Hindering Further Mainstream Adoption of Bitcoin, JPMorgan Says