The correlation between Bitcoin and one of the oldest and arguably safest investment vehicles, gold, has surged to a five-month high, as reported by IntoTheBlock.
Conversely, Ethereum’s correlation shows a stark decline, despite ETH being deemed an ultra-sound money following several updates in recent years.
Increasing Correlation Between BTC and Gold
Gold and Bitcoin are often compared due to their shared characteristics, such as limited supply and the absence of a central authority. This comparison is predominantly made by advocates of the digital currency. Proponents argue that BTC holds an advantage over gold because of its digital existence and a fixed supply cap of 21 million coins.
Nonetheless, Bitcoin is a relatively new asset with less historical data, a lower market capitalization, and a tendency for volatility. This has fueled critiques from skeptics like Peter Schiff. While the price movements of both assets may diverge during certain periods, they generally align during times of economic instability and crises.
According to IntoTheBlock, there have been numerous instances this year where Bitcoin and gold mirrored each other’s performance. Initially, both approached unprecedented levels in March and April, but they diverged in May and July. Since summer, the correlation has been on an upward trend, peaking at 0.75 yesterday, marking the highest since April.
Bitcoin’s correlation with gold has been climbing, now reaching its highest level since March.
In contrast, $ETH‘s alignment with gold remains minimal and largely insignificant.
Key Takeaways
Bitcoin’s increasing correlation in recent months aligns with… pic.twitter.com/fGstlFiAT6
— IntoTheBlock (@intotheblock) September 24, 2024
CryptoPotato recently evaluated the year-to-date performances of both assets, concluding that BTC has outperformed its counterpart, despite being significantly below its all-time high from March, while gold continues to reach new heights, with the latest price hitting $2,670/oz earlier today.
Ethereum and Gold Taking Different Routes
ITB’s analysis indicated that while investor behaviors reveal “Bitcoin’s evolving role as a macroeconomic hedge,” the same cannot be asserted for the second-largest cryptocurrency.
“Ethereum’s limited connection with gold demonstrates its status as a more speculative asset driven by growth. Its price fluctuations are less swayed by external economic conditions and are more influenced by its underlying ecosystem, such as DeFi actions and staking.”
This perspective challenges the assertion of ETH as ultra-sound money, illustrating that Ethereum serves a distinct purpose in the cryptocurrency market.
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