Bitcoin’s Correlation to Gold Hits Two-Year Low: Warning for Investors
• Bitcoin’s correlation with gold is at a two-year low, suggesting that it remains a risk-on asset.
• The 30-day Pearson correlation metric has dipped close to -1 for the first time in over two years.
• Market volatility due to tight monetary policy could mean that this may change in the future.
Bitcoin’s Correlation With Gold Falls
Bitcoin’s correlation with gold has been steadily decreasing, indicating that it retains its status as a risky asset rather than becoming a store of value like digital gold. The 30-day Pearson correlation metric recently reached close to -1 for the first time since November 2021, when the FTX collapse provoked significant market turmoil.
The 60-day rolling window measured the same indicator and showed that the correlation between Bitcoin and gold is now at its lowest level in eighteen months, when Russia invaded Ukraine in February 2022 and caused huge market volatility. This highlights yet again that Bitcoin is still mainly seen as an investment option with higher risk associated with it.
Monetary Policy Impacts
It should be noted that the full effects of tight monetary policy are yet to come, so investors should not get too far ahead of themselves when assessing future performance. The current situation suggests that Bitcoin will remain on the long end of the risk spectrum until further notice.
Store Of Value Status Remains Distant
This also indicates that achieving store of value status akin to digital gold remains a distant goal for now. Last month we looked into this issue when there was already evidence of divergence between these two markets; this trend has continued since then and looks set to persist until further notice.
In conclusion, it appears clear from recent market indicators that Bitcoin is still viewed primarily as a risky asset rather than a safe haven for investments like gold – although changes in monetary policy could affect this outlook in the coming months and years.