Bitcoin, the Virtual Gold Anticipated by Some, Functions More Like a Risk Barometer in the AUD-JPY Forex Market

President Donald Trump’s trade war has introduced significant volatility to financial markets since March, prompting investors to seek assets that may provide a hedge in this turbulent environment.

What’s clear: Bitcoin (BTC) is not one of those assets, which is disappointing for bullish investors who have traditionally viewed the largest cryptocurrency as digital gold—either as a store of value or a safe haven investment. The reality is that since the onset of the trade war, bitcoin has become more closely correlated with the Australian dollar-yen pair (AUD/JPY), which serves as a risk barometer in the foreign exchange market.

Data from TradingView indicate that the 90-day correlation coefficient between bitcoin and the AUD/JPY pair turned positive in late February and has since reached its highest point since November 2021. The escalating tariff conflict has resulted in a staggering 245% cumulative levy on Chinese imports to the U.S., prompting Federal Reserve Chairman Jerome Powell to reiterate the risks of stagflation on Wednesday.

Bitcoin’s correlations with gold show that the correlation value of 0.80—where the maximum value is 1—is considered strong, indicating that the movements of BTC and AUD/JPY closely align. In contrast, bitcoin’s 90-day correlation with gold flipped negative in late February and has since fallen to -0.80, which is just above the minimum value of -1. This means that while the two assets are moving in relation to one another, they are doing so in opposite directions.

BTC as a Proxy for Risk

The Australian dollar, being sensitive to China and representing a commodity-exporting nation, is perceived as a risk currency. Conversely, the yen acts as a safe haven due to Japan’s status as a net international creditor with near-zero interest rates.

When global markets are optimistic and demand for commodities rises, the AUD typically appreciates, reflecting a higher risk appetite among investors, while the yen declines. Conversely, when markets turn risk-averse, the opposite trend occurs.

Traders often monitor AUD/JPY as an indicator of risk sentiment, viewing uptrends as positive signs for risk assets like stocks, and the opposite for downturns. Bitcoin, which has been taking on a similar role, has strengthened its position. The correlation data suggests that BTC is now as much a proxy for risk sentiment as AUD/JPY.