As cryptocurrencies have grown popular over the past year, researchers have noticed an inverse relationship between gold and bitcoin markets. Over the past two weeks, as cryptocurrency markets have slumped, financial analysts are reporting even more data about the correlation between both assets.
Researchers and Gold Dealers Believe That When Bitcoin Prices Recently Dropped In Value Investors Rushed Towards Gold
Financial executives and researchers believe bitcoin and gold have an interesting relationship. Over the past year, cryptocurrencies spiked while gold markets slumped, and when gold prices jumped, digital assets dropped in value. Analysts have seen the inverse relationship more clearly over the past two weeks, when the bitcoin market had its most significant drop in value since January of 2017. For instance, Daniel Marburger, the director at precious metals firm Coininvest, detailed in an interviewthat on January 16 he sold 30 kilograms of gold for bitcoin.“We have been inundated with emails, and the phones have been ringing continually with customers asking how they could turn their cryptocurrency into gold,” explains Marburger.
"It is an unprecedented time and shows the sway from bitcoin and other cryptocurrencies back to a solid, robust investment in these uncertain times."
There’s a Close Inverse Relationship Between Gold and Bitcoin
Additionally, the research analyst Scot Macdonald from Seeking Alpha points out that there’s been an inverse relationship between bitcoin and gold for quite some time, but even more so since the creation of bitcoin futures markets. Macdonald’s Elliot Wave analysis indicates that bitcoin prices have bottomed out and are “poised for a move up in the coming week.” Meanwhile, after gold markets took the reins last week, Macdonald’s research reveals that the precious metal’s value is “heading into a bearish period.” “Based on my analysis, you should buy bitcoin and sell gold in the coming week,” Macdonald emphasizes in his report.
Since bitcoin futures markets started and bitcoin markets hit $19k, Macdonald notes that gold was trading at about $1,265. Further, since bitcoin reversed from the $19k zone, the price of gold started rising. Macdonald indicates that the same market reactions took place this past March and September. He says the inverse relationship may help predict what each asset movement will do in the near future stating:
What this inter-market relationship tells us is that there is a close inverse relationship between gold and bitcoin. We are going to continue to watch this closely because it is telling us that we should be buying bitcoin and selling gold as of last Friday.
Escaping the Most Destructive Ponzi Scheme: The Fiat Regime
Mark O’Byrne, the founder of Goldcore, a precious metals merchant, says that his company has been seeing the trend between both markets as well. O’Byrne says traditional investors are mitigating the risks of volatile cryptocurrencies to a traditional investment that’s usually more stable.“[Bitcoin traders] told us they were concerned that the massive price appreciation was unsustainable and they got nervous about it — We think increasingly people are realising that these digital assets have much higher risk levels than the traditional safe haven asset,” explains O’Byrne to the press. Ross Norman, another gold dealer from London, says customers of all ages are coming in and trading bitcoin for gold.“We’re seeing trades north of a million pounds every couple of weeks,” Norman details.Over the past year a lot of bitcoin proponents, bullion dealers, and financial analysts are seeing the tethered relationship between both assets that are considered ‘safe havens.’ The world’s tumultuous economy has drawn investors towards both physical and now digital gold. The financial researcher Andy Hoffman believes both of these investments are allies towards ending “the largest most destructive Ponzi scheme — Fiat.” Hoffman emphasizes that these financial tools are not enemies but rather “twin destroyers of the fiat regime”.