Bitcoin’s Correlation to Gold Tightened in March Amid TradFi Woes


As it imitated a safe-haven asset, Bitcoin’s correlation to the stock market weakened in the meantime.

In March, Bitcoin, the most valuable cryptocurrency by market cap, demonstrated a strong correlation to gold, behaving more like one of the world’s oldest currencies.

As a banking crisis emerged in the United States, the value of the two assets moved in parallel directions throughout the month, edging upward. and toppled several institutions like A European juggernaut like Credit Suisse was eventually shut down by Silicon Valley Bank.

Blockchain analytics company Kaiko estimates that there is currently a 50% correlation between Bitcoin and gold. It represents the strongest connection between the two assets in more than a year, Kaiko analyst Dessislava Aubert told Decrypt.

“It’s a significant shift because over the course of 2022 Bitcoin and gold were mostly uncorrelated,” she said. “As a result, it was not at all moving as a safe haven [asset].”

Bitcoin has increased 25% over the past month to about $28,000, recording its third consecutive month of gains despite regulatory challenges. The price of gold has increased by over 8% over the past month, and on Monday it was very close to reaching an all-time high of $1,988 per troy ounce.

Buy Antminer S9 – the Profitable Bitcoin ASIC Miner >

Bitcoin is Pumping—But It’s Not Yet ‘Decoupling’ from Stocks, Analysts Say

Bitcoin's Correlation to Gold Tightened in March Amid TradFi Woes

On Tuesday, as Bitcoin’s price soared past $26,000, crypto traders rushed to assert that the recent uptick in the price of digital assets represented a significant shift in momentum. Crypto Twitter is filled with examples of users claiming that the spike in Bitcoin’s price is evidence of digital assets diverging from other risk assets like stocks, with some calling it “The Great Decoupling.” Digital assets and stocks both experienced similar price movements throughout much of the previous year despite the slowdown in the economy…

Unlike stocks, cryptocurrencies are typically seen as risky investments rather than as a safe haven asset. And because the Federal Reserve has aggressively increased interest rates to combat inflation, these risk assets have taken a beating over the past year.

However, Aubert noted that as investors’ perceptions of Bitcoin’s strengths as a store of value change, it is possible for its status as a risk asset to change somewhat.

“For now, people are trying to put Bitcoin in a very traditional framework,” Aubert said. “Because it could be many different things, it’s very difficult.”

In the meantime, there is a strong correlation between Bitcoin and the S&P 500, a significant index frequently used to track changes in the US. stock market—fell significantly in According to Aubert, the trend increased from March to 20%, continuing a long-term upward trajectory.

“Bitcoin’s correlation with equities has been going down since December, steadily, and it’s now very low,” she said, adding that 20% is essentially negligible.

Aubert asserted that factors that affect stocks, such as the Fed’s monetary policy, will continue to have an impact on Bitcoin. Additionally, she mentioned how Bitcoin is sensitive to shifts in overall liquidity.

Is Bitcoin Really Decoupling from Stocks? Experts Weigh In

The wry humor comes from the fact that Bitcoin has occasionally had a strong correlation with conventional markets. The majority of bitcoiners prefer that BTC not be highly correlated with conventional assets, such as stocks and bonds. After all, one of the central tenets of the world’s largest cryptocurrency by market capitalization—$379 billion as of this writing, according to CoinGecko—is that it avoids traditional finance. That’s why self-avowed Bitcoin fans, like Gemini co-founder Cameron Winklevoss

As Bitcoin begins to behave more like a safe haven asset and less like a risky one, there are some fundamental similarities between Bitcoin and gold that are notable, CoinShares’ Head of Research James Butterfill told Decrypt.

The fact that the two assets’ value is supported by a limited supply is one thing they have in common, he said. The supply of Bitcoin is capped at 21 million, similar to how there is a finite amount of readily available gold in the world. Predictions indicate that the last Bitcoin will be mined in the year 2140.

“Bitcoin, in fact, is technically a harder asset than gold because it’s a finite supply, but [also] a very well-known finite supply,” Butterfill said. “Theoretically, you could explore the cosmos and discover a huge quantity of gold, bring it back to Earth, and saturate the market.”

Perhaps there is evidence to suggest that Bitcoin and gold are convergent on the cultural front as well.

A golden hardware wallet that looked like an expensive chain was visible on the California-based rapper Snoop Dogg when he entered the ring at WrestleMania 39 yesterday.

Scroll to Top