In the last year, Total World Indices have skyrocketed by 28%, and both Bitcoin and gold are experiencing impressive gains. While many might think these two assets are closely related, the reality tells a different story.
Gold is currently at an all-time high, but Bitcoin is about 6% lower than its peak. Interestingly, the correlation between these two has dropped significantly. Four years ago, Bitcoin and gold had a correlation value of over 50%, meaning they often moved together. Today, that figure has plummeted to nearly zero.
A closer look at the numbers reveals that bitcoin’s 90-day correlation with gold stands at just 0.04. This means that gold’s average returns have little to no effect on bitcoin’s performance.
For example, back in October 2020, bitcoin had a 50% correlation to gold’s returns, indicating that the two often moved together. Now, bitcoin trades independently of gold, defying the notion that it is “digital gold.”
The correlation scale ranges from 1, indicating that two assets always rise together, to -1, meaning they move in opposite directions. Bitcoin’s current correlation to gold suggests that their prices are not influencing each other at all.
As bitcoin and gold move on their separate paths, traders will need to rethink how they view these two assets in the market.
Also Read: Middle East Tensions: Bitcoin Descends But Gold and Oil Rise
