As Bitcoin (BTC) rebounded to its 2020 peak of $ 11,392 this week, its correlation with gold increased, and right now, BTC’s monthly correlation with gold on daily returns stands at 0.66, according to CryptoCompare data.
The correlation began to rise as gold broke $ 1,900, reaching a new high before retreating alongside Bitcoin.
The increase in correlation represents a trend change as the relationship between the two had previously been falling, according to data from the Kraken Exchange research team.
BTC monthly correlation in daily returns. Source: CryptoCompare
While the correlation between gold and Bitcoin has increased, the correlation of Ether (ETH) with Bitcoin started to decrease at around the same time and the figure is now at 0.56.
CryptoCompare research analyst James Li told Cointelegraph:
With innovations and hype around DeFi, we begin to see decoupled pricing within the crypto space. Ethereum is an enabler and we saw a much stronger gain in the past few weeks, along with the gains from other DeFi tokens. “
Is BTC’s strong correlation to gold a bullish or bearish sign?
Often referred to as “digital gold,” Bitcoin’s correlation with the precious metal may further cement its position as a high-value asset at a time when the United States Federal Reserve is preparing to pass yet another bill. coronavirus stimulation.
Li noted that while previous correlations between Bitcoin and gold triggered BTC price spikes, the context has certainly changed.
Li elaborated saying:
“The last time Bitcoin had a moderate correlation with gold (around 0.5) was towards the end of 2018. It was then that a month earlier, in November 2018, bitcoin suffered a 50% drop (at the peak from Bitcoin’s cash war) and made some subsequent rebounds Gold was recovering from a somewhat cyclical decline a couple of months earlier. The moderate correlation back then was perhaps a coincidence. “
As the dollar and the economy continue to grapple with the aftermath of the COVID-19 pandemic, it seems likely that value assets like Bitcoin and gold will continue to be in high demand.
