The bitcoin safe haven narrative could be back as data shows that the cryptocurrency’s correlation with gold has surged in recent months.
Bitcoin’s correlation to 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 Correlation to Gold” shows how closely Bitcoin tracks the movements that take place in the price of a troy ounce of gold.
When the value of this metric is negative, it means that BTC is currently reacting to movements in the price of gold by moving in the opposite direction. On the other hand, positive values of the indicator imply that the two assets are currently moving in a similar trajectory.
Of course, if the correlation is zero, this suggests that there is no pattern in how the cryptocurrency and gold move relative to each other.
Now here is a chart showing the trend of Bitcoin’s 30-day correlation to gold, as well as its 90-day and 365-day versions over the last few years:
It looks like the value of the metric has been quite high for the past few days | Source: The Week Onchain by Glassnode – Week 16, 2023
The chart above uses the symbol “XAU”, but note that this term refers to an ounce of gold and not the Philadelphia Gold and Silver Index.
As illustrated in the chart, Bitcoin’s correlation to gold during the 2021 bull run did not show a very strong positive correlation as the metric had turned negative for a reasonable portion of the period.
The correlation also remained weak in the early months of 2022, but things started to change as the bear market took hold. Over the past 12 months, the indicator has mostly recorded high positive readings, suggesting that the two assets have been strongly linked over this period.
However, the FTX crash was an exception as the indicator’s value had turned deep red by the time it took place. Nonetheless, assets quickly became highly correlated again this year with the rally as all three MAs (30-day, 90-day and 365-day) turned positive.
Gold has traditionally been considered a safe haven, while stocks and BTC in general have been considered risky assets. As the correlation between bitcoin and gold has gotten high lately, it seems that the digital gold narrative could be making a comeback.
Interestingly, the correlation also stayed high during the US banking crisis some time ago, when institutions like the Silicon Valley Bank (SVB) collapsed and shook the market. This could be further evidence that BTC is being viewed in a better light of late.
“This suggests that an appreciation for both sound money and the reality of counterparty risk is increasingly at the forefront for investors,” notes Glassnode.
BTC price
At the time of writing, Bitcoin is trading around $29,500, up 1% over the past week.
BTC seems to have crashed over the past day | Source: BTCUSD on TradingView
Featured image by Aleksi Räisä on Unsplash.com, Charts by TradingView.com, Glassnode.com
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