Does Copper Serve as a Useful Comparison for Bitcoin’s Market Price and Fluctuation?

Bitcoin and other related cryptocurrencies have irrevocably changed the face of online and digital payment systems. The currency is a novel way of processing transactions online and comes with a range of additional benefits and advantages.

However, the bitcoin market is notoriously volatile and unpredictable, it sees wild fluctuations over the course of days or even hours. Investors and traders have long sought a reliable way to measure bitcoin’s market movements and currently do so by carefully examining the market or studying a live BTC price chart. Can copper be used as a comparison for bitcoin’s market price and movement? Let’s find out.

What is Bitcoin?

Bitcoin is a type of digital currency known as a cryptocurrency that is used as a form of digital payment for online transactions. Bitcoin transactions are stored on a public digital ledger called the blockchain, where each transaction is publicly accessible. This means that using cryptocurrencies like Bitcoin can significantly reduce the risk of fraud.

Bitcoin is decentralized, which means it does not require management by an organizational body. This means it is not subject to traditional transaction fees or costs, even for cross-border payments, making it an increasingly popular payment option for major international businesses.

Bitcoin has seen major fluctuations in its value. It started out as a relatively unknown currency with little value to a hot commodity with the potential to make investors millions. This market volatility makes Bitcoin difficult to predict, and it is still seen as something of a risky investment.

What About Copper?

Copper is a base metal that sees widespread use across a range of different industries and sectors. In what may come as a surprise, copper can also be used as an indicator of broader market trends and economic performance. In fact, the metal is so accurate as an indicator that it is even affectionately referred to as ‘Dr. Copper’.

Copper has numerous uses across commercial products and manufacturing processes. This means that when an economy is strong, copper will be more highly in demand, which will drive up its price. Therefore, a high-value copper can be used as an accurate indicator of broader economic performance.

Rising copper prices can indicate increased manufacturing and can signal a burgeoning job market while falling prices can indicate economic instability and even recession.

Copper and Bitcoin

In 2020, Goldman Sachs analysts identified a correlation between copper and Bitcoin. As other markets faltered during the Covid-19 pandemic, the value of both copper and Bitcoin shot up, with Bitcoin surpassing $20,000 for the first time ever. Copper performed similarly well, in what came as a surprise to analysts given the global economic turmoil at that time.

Since then, the connection between copper and Bitcoin has only grown. Now, the value of Bitcoin is more closely connected to the value of copper than it is to more traditional equity indexes.

Both copper and Bitcoin are what are known as ‘risk-on’ assets. This means that investing in them carries more risk than safer investment options such as gold. When the economy is strong, investors will be more willing to take risks and as a result, will see a boost in the value of risk-on assets like copper and Bitcoin. Conversely, when the economy is struggling we are likely to see these assets being sold off in favor of more stable alternatives.

Bitcoin is used in payment systems, so when businesses are performing well we can expect to see its value rise. Similarly, copper is used in manufacturing so when industries are healthy the value of the asset will reflect this.

Bitcoin and Gold

Despite Bitcoin and gold having some significant differences in terms of their respective risk factors and market stability, analysts have noted an increasing correlation between the two assets.

The two followed a similar trajectory over the mid-latter half of 2022, with many experts predicting that it could indicate that Bitcoin is moving further away from traditional equities. Tech stocks have had a tough year, with share prices plummeting in the third quarter. Many expected Bitcoin to follow a similar path. However, the digital asset proved surprisingly resilient, dropping by just 1%, substantially better than some of the major tech indexes.

This could signify that Bitcoin is forging its own path, and that it will be less tied down to overall market performance and could end up being a market indicator in and of itself, much like copper or gold. However, where Bitcoin differs from gold is that it may never prove to be as stable or safe an investment. Gold has long been perceived as a viable investment option for preserving wealth in tough economic times. Given Bitcoin’s volatility and unpredictability, it’s hard to see it ever rivaling gold in that respect.

Conclusion

Global markets are constantly changing. They are influenced by a wide range of both internal and external factors, from industrial and business performance to geopolitical events. Copper appears to be useful for indicating both Bitcoin’s performance and the health of the economy overall, but we could see Bitcoin become an indicator itself in the near future.