bitcoin has often been referred to as “digital gold” as it has proven to be a unique asset class and, more importantly, a reliable store of value over the years. While gold surely surpasses btc in age, both assets are often used by investors as a hedge against economic instability and inflation.
Interestingly, there is almost always a positive correlation between bitcoin and gold, limiting diversification opportunities for investors. However, the latest data shows that the leading cryptocurrency and the precious metal have been decoupling in recent weeks.
btc is losing correlation with gold: what's next?
In a recent Quicktake post on the CryptoQuant platform, an analyst with the pseudonym Darkforst <a target="_blank" href="https://cryptoquant.com/insights/quicktake/674110c4e1767374b9746cab-bitcoin-and-gold-have-started-to-decouple” target=”_blank” rel=”noopener nofollow”>spoke of the relationship between the price of bitcoin and gold. According to the expert, there is a continuous decoupling between the cryptocurrency market leader and the gold market.
For context, correlation is a metric that measures the degree of association (how closely related) of the price direction of two specific assets. When the correlation value is positive, it implies that the two assets are moving in the same direction. It is worth mentioning that the closer the value of the metric is to 1, the more correlated the assets will be.
On the other hand, a correlation value less than 0 indicates that the two assets are negatively correlated, meaning they are moving in opposite directions. Similarly, the closer the correlation value is to -1, the less related the assets are.
While the gold market has performed well in recent months, the price of the metal has plummeted in recent weeks. On the other hand, the price of bitcoin has enjoyed strong bullish momentum in November, setting successive all-time highs in recent weeks.
Source: CryptoQuant
As a result, the correlation between the price of bitcoin and gold has fallen below the zero mark, moving towards negative territory, as shown in the chart above. According to Darkfost, decoupling appears to be in btc's favor as it could lead to a “liquidity shift” and cause more capital to flow into the flagship cryptocurrency.
bitcoin price at a glance
At the time of writing, the btc price is around $98,000, reflecting a decline of almost 1% in the last 24 hours. However, the performance of the leading cryptocurrency in the weekly period is still quite remarkable. According to data from CoinGecko, the market leader is up more than 7% in the last seven days.
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The price of btc on the daily timeframe | Source: BTCUSDT chart on x/38WxSSui/" target="_blank" rel="noopener nofollow">TradingView
Featured image from iStock, chart from TradingView
