Bitcoin (CRYPTO: BTC) is behaving more like a high-beta tech stock than a hedge, with its correlation with AI equities rising to record levels during recent market drawdowns.
According to Dennis DeBusschere, analyst at 22V Research, Bitcoin’s correlation with the S&P 500 has surged to one of its highest historical readings during the nascent equity pullback.
This trend is especially pronounced during spikes in implied volatility, as measured by the CBOE Volatility Index, or VIX. Bitcoin's negative correlation with the VIX — which tends to deepen when market stress increases — underscores its evolving profile as a risk-on asset.
“Bitcoin has become more equity-like over the past five years, putting it into a more institutional friendly framework, but its tendency to trade with equity momentum when vol spikes reduces its potential as a hedge or a diversifier in a portfolio,” DeBusschere wrote in an emailed note.
That link has tightened this year. Bitcoin has struggled whenever financial conditions tightened, a trend that also weighed on AI names, speculative technology stocks and popular retail investor trades.
Gold Goes Its Own Way Again
A notable divergence is emerging. Gold had been trading like a momentum asset during the September and October rally, which was unusual and historically preceded drawdowns.
That pattern reappeared as the metal rolled over in October.
But gold has now broken away from Bitcoin, AI stocks and retail favorites.
DeBusschere said gold's sensitivity to financial conditions has stayed low, and that shift has made it a more effective hedge and a better diversifier than Bitcoin in recent weeks.
Gold stabilized while Bitcoin gapped lower, a move that reshaped one of the most popular macro narratives of 2023–2024—the idea that gold and Bitcoin were part of the same inflation-hedge trade.
They no longer are.
The SPDR Gold Shares (NYSE:GLD) has risen 54% year-to-date, while the iShares Bitcoin Trust ETF (NASDAQ:IBIT) is down 9%.
What It Means For Portfolios
Bitcoin's rising correlation with stocks means it amplifies risk when markets turn volatile.
Gold's recent divergence suggests it has regained its hedging value, while Bitcoin is trading closer to a speculative momentum asset tied to AI sentiment, retail enthusiasm and liquidity cycles.
The takeaway for traders is straightforward: Bitcoin's hedge credentials shrink during volatility spikes, while gold's tend to strengthen.
“Gold is back to being a more effective hedge/portfolio diversifier,” DeBusschere said.
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Image created using artificial intelligence via Midjourney.
