Bitcoin is officially correlated with Gold, at least over the past 90 dayssteemCreated with Sketch.

in bitcoin •  last month

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:

(Source: https://www.coindesk.com/gold-price-may-offer-clues-about-next-big-bitcoin-move)

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.

Final thoughts:

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.

Follow me: @jrcornel

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Silver and Gold, Silver and Gold 😂😂😂

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Which do you own?

Interesting read thanks for the link. Could be some people expecting that final dip. Moving from crypto to gold? Most people in gold or crypto dont trust the fed could be some people moving from crypto to gold expecting the last drop under 3k for btc.

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Could be. I think bitcoin currently represents a risky asset ever since Wall Street started getting into, at least that is how they view it. So, they turn the sell programs on anytime there is a risk off event.

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I think this reflects the importance that Bitcoin is gaining, we are closer to be considered a viable asset and this negative correlation with gold translate that.

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Why do you think that?

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Financial assets always move on the opposite direction of gold. For example, if the markets are going on a bull run, the gold market is going down (and vice-versa), that's why gold is called an asset of refuge.

And the correlation you showed, might mean that Bitcoin is starting to be seen as a viable asset to be invested in.

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Yes, it is being seen more as a "risky asset" right now, similar to that of stocks, compared to that of a store of value in times of uncertainty.

I have never thought that this kind of correlation existed!
Keep up with creative content.

QE has definitely distorted the market as cash is abundant and manipulating prices in many futures markets. Gold and silver have long been reported to be victims of this. That is why unless an extreme scenario, gold is no longer that much of safe haven for short term volatility.

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Correct. By this logic, we would expect to see bitcoin do well in the next risk on environment. However, that may be a while considering the current macro economic environment combined with rising interest rates.

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