Both Bitcoin and gold are experiencing significant growth in a global bull market, with Total World Indices skyrocketing by an impressive 28% over the last year. Given that both assets are approaching or hitting all-time highs, it’s natural for traders to presume a correlation between the two.
However, the truth is that the correlation between gold and bitcoin is at an all-time low. While gold is reaching unprecedented levels, bitcoin is actually trading at 6% below its all-time record.
Additionally, the standard correlation measure of bitcoin to gold has plummeted from above 50% four years ago to nearly 0 today. Traders who examine a 90-day smoothed price chart of both bitcoin and gold are likely to notice fewer similarities than ever before.
Specifically, back in October 2020, the average daily returns of bitcoin had a positive correlation of around 50% with the rolling 90-day returns of gold. Nowadays, bitcoin operates independently of gold.
The current 90-day correlation of bitcoin to gold stands at just 0.04.
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Correlation values can span from 1, indicating a perfect correlation where two assets always move together, to -1, representing a perfect negative correlation where assets move in opposite directions.
Bitcoin’s correlation of 0.04 to gold suggests that the average returns of gold have little to no bearing on the average returns of bitcoin over a three-month period. If bitcoin is truly digital gold, as some assert, its trading has certainly not reflected that over the past 90 days.
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