If gold enters an upward trend for the upcoming recession, copper is acting the opposite. With applications covering construction, manufacturing and electrical equipment, industrial metal has long been considered a sign of economic growth.
After falling to a two-year low earlier this month amid fears of a global slowdown, uncertainties are now emerging in copper futures due to trade tensions between the United States and China.
Meanwhile, CME Bitcoin futures have increased by 17 percent since the end of May. Positive thinking in the cryptocurrency, which strongly correlates with the negative perception of copper clichés, may be worth watching this relationship. Given the different price movement between Bitcoin and metal, could Bitcoin be facing a difficult time in the future?
From One Trend Setter to Another
China accounts for 40 percent of global copper demand. GDP growth in China fell to 6.2 percent in the second quarter of the year, continuing to suffer a multi-year decline. This represents a 27-year low. The drop in copper prices on the London Metal Exchange (LME) appears to be as follows, due to increased commercial tensions and tariffs:
At the same time, China’s demand for Bitcoin increased by 50 percent between August 5th and 15th, according to Hong Kong-based Babel Finance. These figures are thought to be linked to the yuan’s depreciation and a stagnant domestic economy. Based on these figures, Bitcoin is probably seen by Chinese investors as a safe haven asset.
Bitcoin Futures Increase Against Copper Raw Material
CME Bitcoin futures contracts rose as copper futures prices fell. Yahoo! Finance states that BTC futures have increased by 7.8% for this month. Copper futures fell by 5.5%.
Bitcoin Futures Increase Against Copper Raw Materials
CME Bitcoin futures rose as copper futures prices fell. Yahoo! Finance says BTC futures rose 7.8% this month. Copper futures declined 5.5%.
Relevant figures in the last three months show a 3% decrease in copper futures and a 17% increase in bitcoin futures.
Low spot prices in copper are closely related to China’s demand. The resulting downward trend in futures suggests that investors fear global recession.
The history of metal as a trend-setting for economic activities is well established, but Bitcoin’s good price fluctuations make it difficult to identify a single cause of price movement. Likewise, given the similarities with gold, the high fears of the global recession point to the recent price increase of Bitcoin and crypto currencies.
A New Economic Emotion Barometer?
The obvious difference between bitcoin and copper is evident. The investors have been supported for a long period of uncertainty, raising concerns that the Chinese-American trade war will leap into the global economy.
Traditional indicators such as reversed yield curves and negative interest rates also contribute to marking investor sentiment. As Bitcoin’s price trajectory differs from these indicators, we may see a risky class of assets emerging in the digital currency and an alternative barometer of the economy’s trajectory.
As a hedge, Bitcoin may show an unusual trend in historical narratives. But it seems to be an intuitively logical development against negative interest rates and challenging currencies.
Needless to say, the Bitcoin price is also influenced by a complex relationship between multiple factors. But in the larger macroeconomic environment, the relationship between copper and bitcoin may be a sign for future moves.