A notable shift was seen in the market structure as Bitcoin and Gold correlation takes a new turn.
Investors are currently fleeing bitcoin and gold amidst a strengthening US Dollar and rising interest rates. This has negatively impacted both – the world’s largest crypto and the precious metal.
As a result, the correlation between the two has shifted and has hit its highest level in more than a year.Over the past year, bitcoin has been mostly uncorrelated with gold. Its correlation hovered between negative 0.2 and positive 0.2. But this year has been particularly unraveling for both cryptocurrencies as well as traditional markets.
Several narratives have been broken, including bitcoin being hailed as a “digital gold” and a hedge against inflation similar to the yellow metal. As a matter of fact, both BTC and gold have seen significant drops in value as inflation broke record highs. While global monetary policy tightening dragged bitcoin down by over 70% since its all-time high last November, gold lost 10% of its YTD gains. A series of aggressive US rate hikes this year are to blame, which have dented the non-yielding metal’s appeal.Gold failed to act as a safe-haven asset even as core inflation remained persistently high. This resulted in a year-high correlation of +0.
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