The Bitcoin safe haven narrative may be back as data shows the cryptocurrency’s correlation to gold has increased in recent months.
Bitcoin’s correlation to gold has increased over the past year
According to the latest weekly report of glass node, the correlation between the two assets remained high during the recent US banking crisis. The “BTC to Gold Correlation” indicates how closely Bitcoin is tracking movements 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 price of gold by traveling in the opposite direction. On the other hand, positive values of the indicator imply that the two assets are moving on a similar trajectory at the moment.
Naturally, when the correlation is zero, it suggests that there is no pattern to how cryptocurrency and gold move relative to each other.
Now, here’s a chart showing the trend in Bitcoin’s 30-day correlation to gold, as well as its 90-day and 365-day versions, over the past 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-Silver Index.
As shown in the chart, Bitcoin’s correlation to gold did not show a very strong positive correlation during the 2021 bull run, as the metric had assumed negative values for a good part of the period.
The correlation also remained weak in the first few months of 2022, but things began to change as the bear market took hold. In the last twelve months, the indicator has registered mostly high positive values, suggesting that the two assets have been tied up tightly during this period.
However, the FTX crash provided an exception, as the indicator value had turned deep red at the time it took place. However, with this year’s rally, assets quickly became strongly correlated again, as all three moving averages (30-day, 90-day, and 365-day) turned positive.
Gold has traditionally been considered a safe haven asset, while stocks and BTC have generally been considered risky investments. With the correlation between Bitcoin and Gold increasing recently, it seems that the Digital Gold narrative may be making a comeback.
Interestingly, the correlation was also held high during the US banking crisis a while back, when institutions like Silicon Valley Bank (SVB) crashed and rocked the market. This may be further proof that BTC is being seen in a better light recently.
“This suggests that appreciation of both sound money and counterparty risk realities are becoming increasingly important to investors,” Glassnode notes.
Bitcoin price
At the time of writing, Bitcoin is trading around $29,500, up 1% in the past week.
BTC seems to have plunged during the past day | Source: BTCUSD on TradingView
Featured Image by Aleksi Räisä on Unsplash.com, Charts from TradingView.com, Glassnode.com
