BTC Correlation With Gold Surges
The Bitcoin safe haven narrative may be back as data shows that the cryptocurrency’s correlation with gold has increased in recent months.
Bitcoin’s correlation with gold has increased over the past year
According to Glassnode’s latest weekly report, the correlation between the two assets remained high during the recent US banking crisis. The “BTC to gold correlation” indicates how closely Bitcoin is following the movements that occur in the price of a troy ounce of gold.
When the value of this metric is negative, it means that BTC is currently responding to movements in the gold price by traveling in the opposite direction. On the other hand, positive indicator values imply that the two assets are moving in a similar trajectory now.
Naturally, when the correlation is zero, it suggests that there is no pattern regarding how cryptocurrency and gold are moving relative to each other.
Now, here’s a graph that shows the trend in Bitcoin’s 30-day correlation with gold, as well as its 90-day and 365-day versions, over the last few years:
Looks like the value of the metric has been quite high in recent days | Source: Glassnode's The Week Onchain - Week 16, 2023
The chart above uses the symbol “XAU”, but note that this term refers to a troy ounce of gold here and not the Philadelphia Gold and Silver Index.
As shown in the chart, Bitcoin’s correlation with gold did not show a very strong positive correlation during the 2021 bull run, as the metric took negative values for a good part of the period.
The correlation also remained weak in the first few months of 2022, but things started to change as the bear market consolidated. In the last twelve months, the indicator has mostly recorded high positive values, suggesting that the two assets were strongly linked in this period.
The FTX glitch provided an exception, however, as the indicator’s value turned dark red around the time it occurred. However, with this year’s rally, the assets quickly returned to strong correlation, as the three MAs (30 days, 90 days and 365 days) obtained positive values.
Gold has traditionally been considered a safe haven asset, while stocks and BTC are generally considered risky investments. With the correlation between Bitcoin and gold becoming high recently, it appears that the digital gold narrative may be making a comeback.
Interestingly, the correlation also remained high during the US banking crisis some time ago, when institutions like Silicon Valley Bank (SVB) collapsed and rocked the market. This could be further evidence that BTC is being seen in a better light recently.
“This suggests that an appreciation for both hard cash and the realities of counterparty risk are increasingly on the minds of investors,” notes Glassnode.
At the time of writing, Bitcoin is trading around $29,500, up 1% over the last week.
BTC seems to have plunged during the past day | Source: BTCUSD on TradingView
Featured Image of Aleksi Räisä on Unsplash.com, Charts by TradingView.com, Glassnode.com