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For an asset that’s known to be highly volatile, Bitcoin has been shedding that characteristic of late.

The largest digital asset is lingering around US$27 000 for the third consecutive Tuesday in what’s been “lackluster price action,” according to K33’s Bendik Schei and Vetle Lunde. And “the remarkably unremarkable state of the market is now aggressively reflected in most metrics,” with seven-day average trading volumes touching two-and-a-half-year lows, and 30-day volatility at its lowest since January, they wrote in a note.

In addition, Bitcoin has been underperforming US stocks during the second quarter. “This has led to a continuation of the prevailing trend throughout 2023 – correlations between BTC and US equities are declining,” the duo said. The token traded higher by 1,1 percent as of 2:17 p.m. in New York to US$27 197.

Despite the muted moves of late, cryptocurrencies have overall been surging this year. Bitcoin had started 2023 at around US$16 600. Much of the move, fans say, may be attributed to digital tokens acting as safe havens during times of market troubles. Many analysts, however, dispute this theory.

In the US, equities investors have been focused on the debt ceiling, which likely has some — though not a ton — of impact on Bitcoin’s price as well, says Ilan Solot, co-head of digital assets at Marex.

“Part of the allure of crypto is being a store of value outside the financial system,” he said. “For some investors, it works as a hedge for anything that looks like systemic or policy risk — be it banking stress, currency debasement, or irresponsible monetary and fiscal policies.”

But not everyone agrees. Cryptocurrencies have in the past failed to act as hedges during geopolitical turbulence, for instance, or when inflation was rising.

The debt-ceiling uncertainty has led to US-dollar strength, which is “another unfortunate hit to crypto assets,” according to Noelle Acheson, author of the “Crypto Is Macro Now” newsletter. – Bloomberg

“But wait, isn’t BTC supposed to be a ‘safe haven’ also? An alternative or ‘insurance’ asset that flourishes when the fiat system is strained?,” she wrote in a note.

“In theory, yes – this kind of environment should be good for crypto assets, especially those with a verifiable and immutable hard cap as well as growing global adoption. But BTC is behaving these days as a risk asset driven by monetary liquidity considerations, which shows that monetary flows still dominate its narrative.”

Bloomberg