Bitcoin’s safe-haven role under scrutiny as stock market poised for correction

The U.S. stock market is bracing for a potential correction after outperforming global peers over the past year, according to analysts. Yet, bitcoin’s anticipated role as a hedge against broader market declines is still not materializing.

Amid a worsening sell-off on Wall Street, deVere Group CEO Nigel Green voiced his concerns to The Block, stating that "the warning signs are stacking up." Green pointed to weakening consumer sentiment, persistently high inflation, and climbing initial jobless claims as critical indicators. “The Atlanta Federal Reserve’s closely watched GDPNow model is already pointing to economic contraction in the first quarter of 2025,” he noted.

The Atlanta Fed’s closely watched GDPNow model forecasts that the U.S. economy will contract at a 2.4% annual rate in the first quarter of this year. If this estimate were to become confirmed, this would mark the first quarterly contraction since Q1 2022, fueling growing concerns about a potential recession. 

Downtrend exposes deeper structural concerns 

According to Green, the resilience that previously powered rallies in risk assets is giving way to deeper structural concerns.

"Investors should be ready to rotate into areas of strength rather than hold onto past winners that may struggle in the new landscape," he advised. “Alternative assets are increasingly critical, gold remains a strong hedge against volatility, while bitcoin may gain further institutional acceptance as 'digital gold.'”

YouHodler Chief of Markets Ruslan Lienkha echoed the concern, asserting that the market is undergoing a correction that could evolve into a medium-term bearish trend.

"Uncertainty is at a local peak, prompting traders to temporarily close long positions," Lienkha told The Block. "Typically, the bond market, particularly U.S. Treasuries, serves as a safe haven for investors during periods of heightened recession expectations."

When asked about bitcoin’s viability as a safe haven in the current market climate, Lienkha was skeptical.

“Bitcoin is definitely not serving as a safe haven during stock market declines at the moment. Instead, it behaves more like a high-risk tech stock, displaying elevated volatility and sharper price fluctuations," he said. "While high volatility may lead to brief periods of divergence, bitcoin’s medium-term performance is likely to remain aligned with overall equity market trends."