(Bloomberg) -- The cryptoasset selloff is testing the industry axiom that Bitcoin is the equivalent of “digital gold,” and therefore belongs in an asset portfolio to hedge against stock market gyrations, like seldom before.

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As equities sank on Monday and carry trades unraveled, Bitcoin behaved more like stocks than gold, at one point tumbling 17% to below $50,000 before recouping some losses. Its correlation with the precious metal turned negative in July, data compiled by Bloomberg show.

“It is unrealistic to think that institutional investors are allocating capital to Bitcoin for the same reason as gold,” said eToro analyst Josh Gilbert. “These two assets don’t play the same role in investment portfolios.”

Instead, some observers contend Bitcoin’s sharp tumble supports the notion that crypto is an asset class particularly attuned to potential dangers — such as the Federal Reserve waiting too long to cut rates and plunging the economy into a recession. “If investors panic or are looking to deleverage, crypto is often the first asset on the list,” Gilbert said.

Comparisons between Bitcoin and gold in part trace their roots to their respective scarcity. Just like there is a finite supply of gold underneath the Earth’s surface, Bitcoin’s blockchain is designed to automatically slow new token creation through a quadrennial process known as the halving. Ultimately, there will be 21 million Bitcoin in circulation.

Some analysts are more reluctant to give up on the Bitcoin-as-gold thesis — or at least the idea that it might one day come true.

“Many investors view Bitcoin as a venture-like bet on its future as digital gold,” Alex Thorn, head of research at Galaxy Research, wrote in a note on Monday. “Unlike gold, Bitcoin is not yet widely held by sovereigns, central banks, or institutional investors.”

Even after dropping 13% since the start of July, Bitcoin remains one of the best-performing major assets, rising 26% this year to handily outpace gold. But the rally was propelled by the launch of US spot Bitcoin ETFs in early January more than any other event. As a hedge for inflation it has done poorly, rising during a time of stubborn price gains while slipping just as evidence started to accumulate that high interest rates were finally biting.

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