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Bitcoin & Gold: Correlated or not?

As uncertainty in traditional markets looms in 2020, with the upcoming United States presidential elections, tensions rising between governments and the new outbreak of the coronavirus, investors tend to flee the equities markets and try to safeguard their capital by investing in gold and “risk-free” Treasury bonds. This, among other factors, explains why 2019 was gold’s best year, in terms of return, since 2010.

Bitcoin, often dubbed the digital gold, has only recently started sharing characteristics with the traditional asset. In a recent turn of events, we started noticing unusual activity during geopolitical tensions and has been slowly gaining since the reputation of a “safe-haven asset”. Additionally, the Bitcoin/Gold correlation has been increasing and is back at all-time highs according to CoinMetrics.

It initially started during the US-China trade war. Some speculated that Bitcoin’s $1,000 breakout from its $3,000-$4,000 lows was a result of the escalation of the trade war. As a first significant reaction to geopolitical tensions, not many adopted that perspective.

More recent tensions, such as the one seen between Iran and the US that lead World War 3 to become a trending topic on Twitter and the outbreak of the coronavirus in China, are proving that Bitcoin is an indeed maturing as an asset and has a real-world use case as a non-correlated asset.

Looking at the price charts for both Bitcoin and gold against the US dollar, we can see an unmistakable correlation, especially during the Iran-US tensions.

BTC/USD [Daily Timeframe]

 

XAU/USD [Daily Timeframe]

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