Bitcoin’s correlation with gold continues to decline, further confirming that the asset has yet to reach the status of digital gold as a store of value. Last month, the correlation between Bitcoin and gold fell to its lowest value since the FTX collapse in November, an event which caused chaos in the crypto markets, while the rest of the financial world traded calmly.
The 30-day Pearson correlation metric is now close to -1, a level not seen since two years ago. The 60-day correlation is also at its lowest in eighteen months, since Russia invaded Ukraine in February 2022 and sparked extreme volatility.
These figures show that Bitcoin is still a risk-on asset. The recent crypto market turbulence, with the SEC suing both Binance and Coinbase and Ripple’s partial court ruling, did not have an impact on the traditional finance markets. Additionally, the correlation between gold and Bitcoin disproves the theory that the asset has achieved its “hedge” status.
Max Coupland, director of CoinJournal, said: “In a lot of ways, Bitcoin’s correlation with gold can be viewed as a progress tracker on the path to achieving the holy grail: an uncorrelated store of value for investors. With this correlation dipping to a two-year low, it is clear there is a long way to go yet. Bitcoin remains highly susceptible to the whims of the stock market and the macro economy, and that is worth bearing in mind for investors amid the recent rise in crypto valuations”.
The pullback during last year’s bear market demonstrated that Bitcoin is still vulnerable to violent drawdowns, and the full effects of tight monetary policy have yet to be seen. Therefore, it is important to remember that the market may be getting ahead of itself.
Ultimately, the charts speak for themselves: Bitcoin is still a risk-on asset. This means that if the stock market does take a downturn, gold will outperform Bitcoin. Although this may change in the future, the current numbers don’t lie.
