| DAILY ISSUE Bitcoin's Big Problem: It Behaves Like a Tech Stock VIEW IN BROWSER For several years running, Bitcoin’s (BTC) diehard fans have championed it as “digital gold” – a fashion-forward reincarnation of the analog portfolio hedge. That assertion is at least half right; Bitcoin is digital. But this trait does not make it a good hedge. Bitcoin has spent the first decade of its young life partying like a rock star – attracting a cult following with its dazzling rallies and anti-establishment bravado. It’s been a lover, not a fighter. As such, this rock star-like-lover has taken a beating: It’s fallen over 50% from its $126,000 peak in October to a $60,000 bottom earlier this month. It now sits at around $68,000. To be sure, Bitcoin is a remarkable innovation that has disrupted long-standing assumptions about money and payments. As such, it will likely continue gaining global “wallet share” over the years ahead. But that does not automatically imbue Bitcoin with defensive qualities. Whatever Bitcoin’s virtues may be, defending a portfolio from harm is probably not one of them. It has more in common with the guards at Buckingham Palace than a Navy SEAL team – better at providing pageantry and a jolly good show than repelling hostile forces. So, in today’s Smart Money, we’ll get into why Bitcoin increasingly behaves like a risk asset rather than a safe-haven portfolio hedge. Then, I’ll share one safer, more effective way to protect your portfolio. Let’s take a look… The Crypto's Shortcomings As a portfolio hedge, the famous crypto falls short on at least two measures… First, the Bitcoin market is still relatively small. The total value of all Bitcoins in existence is roughly $1.8 trillion. While substantial, that figure pales alongside the world’s two leading financial hedges: U.S. Treasurys and gold. The total value of all U.S. Treasury securities outstanding is $27 trillion. The total value of all gold ever mined is roughly $30 trillion, about half of which exists in some sort of investible form. In round numbers, then, these two traditional safe havens total more than $40 trillion in tradable form. If a genuine selling frenzy descended on Wall Street, putting fear into the $73 trillion worth of stock that trades there, the Bitcoin market could not accommodate panicked investors as easily as the established safe havens that are more than 20 times its size. But even if Bitcoin could accommodate a meaningful portion of capital fleeing from the stock market, there is little reason to believe it would. A reliable stock market hedge must demonstrate an inverse correlation with stocks. It must hold its value when stocks are losing theirs. Otherwise, it isn’t much of a hedge. Bitcoin’s brief trading history does not demonstrate that tendency. This brings me to Bitcoin’s second shortcoming: It behaves like a tech stock. Here’s what I mean… A Tech Stock in Crypto's Clothing The daily price correlation between Bitcoin and the tech-heavy Nasdaq Composite index has been rising significantly over the last two years. The chart below tells the tale. It tracks two sets of price correlations. First, the green line shows Nvidia Corp.’s (NVDA) 90-day price correlation to the Nasdaq. As you can see, it has been hovering around the 75% level for the last two years. That high correlation is as it should be. Because Nvidia accounts for the largest weighting in the Nasdaq, its share price should track closely with that index. 
But the black line, which tracks Bitcoin’s price correlation with the Nasdaq, is much more surprising. It shows that the cryptocurrency’s correlation has soared so significantly during the last two years that it is now nearly as high as Nvidia’s! In other words, a cryptocurrency that has nothing to do with tech stocks is now almost as closely correlated with the Nasdaq as a tech stock that is the single largest component of that index! The next chart tells a similar tale. It shows that Bitcoin has demonstrated a closer correlation with the Nasdaq over the last six months than Tesla Inc. (TSLA), Microsoft Corp. ( MSFT), Meta Platforms Inc. (META), or Apple Inc. ( AAPL) . In other words, from a trading standpoint, Bitcoin might as well belong to the “Magnificent Eight”! 
This remarkable, and somewhat shocking, phenomenon is not comforting for any investor who expects Bitcoin to provide protection against a stock market selloff. All of this means that the cryptocurrency will probably continue to behave like a tech stock, for better or for worse. The risk here is that Bitcoin’s price movements have become highly correlated with software and tech stocks. When those stocks sell off, Bitcoin often follows. Consider the current “SasSpocalypse” we find ourselves in, the steep selloff of software-as-a-service (SaaS) companies. Bitcoin's recent decline is partly due to the broader selloff in SaaS and tech stocks, driven by a high correlation between the two asset classes. The bottom line is that Bitcoin now behaves more like a risk asset than it does a safe haven. Here’s the heart of the matter… The Better Bet to Safeguard You Portfolio A hedge that moves in sync with the very assets you’re trying to protect against is not a defense. When markets turn hostile, it’s prudent to expect Bitcoin to act exactly as it has before: like a high-volatility tech asset, not a financial shock absorber. The better defense is to “future-proof” your portfolio. The action to take is simple: Rotate your money into companies that have these three defining characteristics… - High human interaction that can’t be automated
- Physical goods or experiences that exist in the real world
- Proven business models with real revenues and profits, not promises
I call these companies “AI Survivors.” These are “future-proof” companies – enterprises that produce physical products or services that AI cannot replace. Take agriculture companies, for example. No matter how sophisticated AI becomes, humans will want to eat avocados and bananas – and AI can’t grow or pick them. AI Survivors are easy to overlook. That’s because they tend to operate in “old school” industries that seem unglamorous on the surface, especially compared to Bitcoin’s rock-star persona. However, these industries could become increasingly glamorous. We’re starting to see this happen as AI fans out across the global economy, claiming victims in hundreds of industries that are not future proof. That is why, in my AI Survivors broadcast, I warn against a massive correction in AI stocks and detail several AI Survivor companies. Non-AI and tech stocks may hold the keys to the greatest investment gains in the months ahead. That’s why the move toward AI Survivors is critical to make, and a better strategy than hedging your portfolio with fool’s gold. Click here to watch my free presentation. Regards, | 
