Strengthened Correlation Between Bitcoin and Gold

The relationship between Bitcoin and gold is undergoing a significant shift. Traditionally seen as independent safe havens, these assets are now displaying a noticeable alignment in their movements. Recent data indicates a growing correlation between the two, marking a new chapter in the interaction between the leading cryptocurrency and the precious metal.

Heightened Correlation Trend

Observations from Kaiko, a crypto market data platform, reveal a rising trend in the correlation between Bitcoin and gold prices over the past several months. The correlation index over a 60-day span is currently on an upward trajectory.

While the correlation is currently moderate at 0.2, a far cry from the peak of 0.5 seen in 2022, this positive correlation contrasts sharply with the inverse relationship observed in late 2023. During that period, Bitcoin and gold exhibited opposing movements, indicating a negative correlation.

Image: Graph displaying the 60-day correlation between Bitcoin and gold. Source: Kaiko

Implications for Investors

If this trend of price convergence continues to strengthen, it could reduce the benefits of diversification across both assets. Assets with high correlation tend to mimic each other's performance.

Portfolios that include both Bitcoin and gold may start moving in alignment, introducing a risk for investors intending to hedge the losses of one asset with the gains of the other.

At present, Bitcoin is trading at around $68,700, marking a 2% increase over 24 hours. This uptrend may see diminishing benefits from gold if their correlation reinforces.