Bitcoin is correlated with gold, but perhaps not in the way you might expect.
Looking back at the last 90 days of trading activity we can see that bitcoin and gold indeed are showing some correlation.
The interesting thing is that this correlation appears to be inversely related.
Meaning that when gold goes up, bitcoin has tended to go down.
Don't believe me?
Check this out:
Over the last 90 days, the correlation between bitcoin and gold comes in at -.59.
That means that as gold goes up, bitcoin has gone down.
Correlation metrics range between -1 and 1, with each extreme showing a direct and perfect correlation.
Bitcoin coming in at -.59 shows that bitcoin has been mostly negatively correlated with the price of gold and has tended to move down when gold moves up over the past 90 days.
Why this is interesting...
In the past, bitcoin has had almost no correlation between financial assets.
However, it was presumed that bitcoin would act as a safe haven in times or turmoil similar to gold, and in the past it has.
Things seemed to have changed starting in about 2016.
Now bitcoin seems to represent one of the riskiest assets on the spectrum.
Meaning that when there is a risk-off event, bitcoin has been sold off similar to other risky assets. During these times, gold has tended to catch a bid.
Most likely this inverse correlation will be short lived as bitcoin has shown throughout its ten year history that it doesn't stay correlated to things very long.
There were times in the past year when bitcoin was also correlated with the US stock markets meaning bitcoin is trading more like a risky asset than a safe haven asset.
My best guess is that QE has helped distort markets and was likely one of the reasons so much money found its way into bitcoin in the first place back in 2017.
In a rising interest rate environment, bitcoin has shown trouble gaining a footing.
It will be interesting to see how it trades when most/all of the euphoric move is taken back from 2017. At that point we should see more 'normal' trading patterns emerge for bitcoin.
Stay informed my friends.
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