The correlation between Bitcoin and gold reached its highest level in the last year; Will this trend continue?

هم‌بستگی بیت کوین و طلا به بالاترین سطح خود در یک سال گذشته رسید؛ آیا این روند ادامه خواهد داشت؟

The decline in bitcoin price tracking from the US stock market has caused analysts to focus again on the increasing correlation of this digital currency with gold. However, the correlation rate of Bitcoin and gold reaching its highest level in the past year raises an important question. Will these two assets continue to synchronize their prices?

To Report CoinDesk, the correlation between the price of Bitcoin and gold has entered a new trend while the correlation of this asset with the stock market has decreased. Especially after the share price has fallen dramatically this year. This new trend reinforces the arguments of those who see Bitcoin as digital gold with the same advantages as safe-haven assets.

Clara Medalie, head of research at Keiko’s cryptocurrency research group, says:

We can see a slight divergence in the price trend of the digital currency and stock markets, which is reflected in the increasing correlation between Bitcoin and gold.

The price of Bitcoin has increased by about 3% in the last 7 days and is now trading in the range of $20,000. The price of gold has also reached over 1,700 dollars with a growth of more than 3% in the same period.

30-day correlation chart of Bitcoin and gold in the past year
30-day correlation chart of Bitcoin and gold in the past year

According to Kaiko, despite the decrease in the price of the digital currency market following the stock market; The Bitcoin-Gold correlation reached over 0.3 last week, the highest level in over a year. The correlation rate of these two assets has fluctuated between -0.2 and +0.2 since the end of last year until this date.

In general, a rate of 0.3 indicates a slightly positive correlation and a rate of 0.5 indicates a relatively strong correlation. On the other hand, negative numbers indicate weak correlation.

The price of Bitcoin has fallen much more than gold this year. Medali believes that the anxiety caused by Russia’s unprovoked attack on Ukraine and the economic crisis of late winter and spring caused Bitcoin to sell in riskier markets such as digital currencies.

However, the price trend separation of the two assets narrowed over time as investors looked for solid ground to insulate them from broader economic volatility.

Bitcoin proponents have long believed that this asset can act as a hedge against economic crises. They liken Bitcoin to gold; An asset that investors have historically respected for its ability to hold value.

Alexander Meurer, co-founder of blockchain-based fitness app Fitburn, told CoinDesk:

At this stage, investors are no longer looking to examine the merits of one anti-inflation asset over another; Instead, since it has been proven that fiat currencies are not sustainable, they are just looking for a better alternative to preserve their funds.

Correlation between Bitcoin and the stock market

Keiko noted that the digital currency market outperformed traditional assets in the third quarter of this year. Especially Bitcoin, whose value decreased by about one percent during this period; While the value of the SNDP 500 index fell by about 5%, and the Dow Jones and Nasdaq industrial averages also fell by 6% and 4%, respectively.

According to Madali, it is still too early to tell whether the current correlation between Bitcoin and gold will strengthen or weaken over time. He attributes the current slight positive correlation to low volatility

Bitcoin has traded in the $19,000-$22,000 range for most of the past two months. This is a sign of caution in investor strategies caused by high global inflation, tight central bank policies and the risk of recession.

Charlie Morris, chief investment officer at Bytetree Capital Management, said he expects the correlation between gold and bitcoin to be higher than usual as the US dollar strengthens amid tighter monetary policy. He explained:

Based on the purchasing power parity assessment, the dollar has not been this expensive since 1985 (1363), although the Federal Reserve has controlled it at some point. When the value of the dollar decreases, the value of bitcoin and gold will increase. In other words, a strong dollar will increase their value and a weak dollar will decrease it.

Morris expects the value of the dollar to be controlled by mid-2033 or perhaps sooner, and the gold-Bitcoin correlation will again decline or even turn negative.


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