Bitcoin’s correlation to gold hits 40-day high as battle for safe-haven asset intensifies

For years, Bitcoin (BTC) proponents have argued that the crypto is poised to become a safe-haven asset and inflation hedge with the potential to replace gold.

Notably, the reality of becoming a safe haven could be realized with the flagship cryptocurrency registering an increased correlation with the precious metal amid the dominating macro factors.

In particular, Bitcoin hit a 40-day correlation with gold standing at 0.50 after the value hovered around zero in mid-August, Bloomberg announced on October 22.

Bitcoin correlation with gold chart. Source: Bloomberg

The correlation puts Bitcoin in the center of attention as digital gold, following a period when the cryptocurrency traded mostly in tandem with stocks. Notably, both asset classes have been hammered by ongoing inflation and interest rate hikes.

Bitcoin’s Declining Volatility

However, Bitcoin’s value has been consolidating around the $20,000 level for weeks, a key factor in the asset’s declining volatility. Notably, the asset also came out as less volatile than some equity products like the Dow Jones Index, with the metric approaching an all-time low.

“A decelerating positive correlation with SPX/QQQ and a rapidly increasing correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty persists and a market bottom remains to be seen,” said a Bank of America strategist.

The rally potential of bitcoin and gold

As Bitcoin and gold battle for safe-haven status, part of the crypto market believes the assets have a chance of earning significant returns in the future while protecting wealth.

According to a Finbold report, the author of the personal finance book ‘Rich dad, poor dad’ Robert Kiyosaki, argued that the economy is likely to collapse, and that Bitcoin and gold can act as a store of wealth.

Additionally, Bloomberg Intelligence commodity strategist Mike McGlone argued after the widespread market correction in the first half of 2022 that Bitcoin and gold were among the assets to lead the recovery.

At the same time, the analyst suggested that Bitcoin’s ability to hold steady after the Federal Reserve’s latest interest rate hikes indicates that the asset is maturing.

Meanwhile, Bitcoin continues to consolidate around the $19,000 level, trading at $19,100 at press time.

Disclaimer: The content of this site should not be considered investment advice. The investment is speculative. When you invest, your capital is at risk.

About Meredith Campagna

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