Bitcoin is often called “digital gold” because over the years it has proven to be a unique asset class and, more importantly, a reliable store of value. While gold certainly outperforms BTC in terms of age, both assets are widely used by investors as a hedge against economic instability and inflation.
Interestingly, there is almost always a positive correlation between Bitcoin and gold, leading to restricted diversification opportunities for investors. However, the latest data shows that the most critical cryptocurrency and the precious metal have separated from each other in recent weeks.
BTC loses correlation with gold – what next?
In a recent Quicktake post on the CryptoQuant platform, an analyst nicknamed Darkforst we talked the existing relationship between the price of Bitcoin and gold. According to an expert, there is a constant disconnect between the cryptocurrency market leader and the gold market.
In context, correlation is a measure that measures the degree of relatedness (how closely related) the price direction of two specific assets. When the correlation value is positive, it means that both assets are moving in the same direction. It is worth mentioning that the closer the metric value is to 1, the more correlated the assets are.
On the other hand, a correlation value less than 0 indicates that these two assets are negatively correlated, meaning they move in opposite directions. Similarly, the closer the correlation value is to -1, the less related the asset is.
While the gold market has performed well in recent months, the price of the metal has declined over the past few weeks. On the other hand, Bitcoin’s price saw a mighty rally in November, setting consecutive all-time highs in recent weeks.
Source: CryptoQuant
As a result, the correlation between Bitcoin price and gold dropped below zero, moving into negative territory, as shown in the chart above. According to Darkfost, the separation appears to be in BTC’s favor as it could lead to a “liquidity shift” and result in more capital flowing into the flagship cryptocurrency.
Bitcoin price at a glance
At the time of writing, BTC is trading around $98,000, reflecting an almost 1% decline in the last 24 hours. Nevertheless, the performance of the main cryptocurrency on a weekly basis is still quite remarkable. According to CoinGecko data, the market leader has gained over 7% over the last seven days.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
