Bitcoin correlation with Gold continues to rise since March due to uncertainty amid the banking crisis and higher interest rates. The banking crisis led investors to put their money in Bitcoin rather than gold as it gave higher returns than gold and US equities.
The BTC price currently trades near the $30,000 psychological level, recording a strong rally of 85% this year. Experts believe the BTC price can hit over $135k after the Bitcoin halving next year.
Bitcoin-Gold Correlation Rises Higher
Bitcoin 30-day correlation with gold has surpassed the 50% level and now stands at 57%, as per data by market analytics firm Kaiko. The correlation is rising since March after regulators closed crypto-friendly banks causing a banking crisis.
It indicates Bitcoin has emerged as a safe haven for its hedge against inflation and a store of value characteristics. During inflation and uncertainty, investors put their money in gold, but Bitcoin witnessed more inflow of money than gold.
For a long period of time, BTC has shown a close correlation to US equities. However, it has outperformed all three indices by nearly four times in Q1 2023.
Amid concerns over the potential economic collapse, “Rich Dad Poor Dad” author Robert Kiyosaki, warned about the state of the global economy. He claims that the U.S. Federal Reserve will be a catalyst for an imminent market crash.
The banking crisis is not over yet as First Republic Bank shares fell over 25% today after a decline of 50% on Tuesday, with the government not inclined to participate in the negotiations.
Bitcoin Price Gains Momentum
BTC price is currently trading at $29,756, up 10% in the last 24 hours. The 24-hour low and high are $27,284 and $30,000, respectively. Furthermore, the trading volume has increased by 70% in the last 24 hours, indicating a rise in interest among traders.
Experts predict Bitcoin can hit $35k amid the latest rally in the next few weeks. The Fed will announce its rate hike decision on May 2, with most probably a 25 bps rate hike as per the current data.
Also Read: Crypto Market Recovery: Bitcoin and Ethereum Price Begins Major FOMO Rally
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
The world’s largest cryptocurrency Bitcoin (BTC) delivered a very strong performance during the first quarter of 2023 by gaining nearly 70%. Currently, the BTC price is under consolidation at around $27,800 levels.
As we know, Bitcoin has outperformed almost every other asset class this year including physical gold and US equities. Also, as per the blockchain analytics firm Kaiko, Bitcoin’s correlation with gold touched a multi-year high last week and is currently around 50%.
Interestingly, this BTC-Gold correlation has surpassed Bitcoin’s correlation with US equities. For a long period of time, BTC has shown a close correlation to the US equities, however, it has outperformed all three indices by nearly four times in Q1 2023.
Kaiko shows, Bitcoin’s correlation with the S&P 500 which is up 7.86% year-to-date. On the other hand, Gold gained somewhere around 8.6% during the first quarter. Outperforming all of these asset classes is Bitcoin which is up 70% since the start of the year.
On the other hand, the share of Bitcoin holders is also increasing simultaneously. Amid the current banking crisis, BTC has once again emerged as a safe haven asset.
Bitcoin and Nasdaq Volatility
Among US equities, Bitcoin has always shown a greater correlation with the tech-heavy Nasdaq index. The Nasdaq 100 index has also made a good recovery gaining more than 20% from December 2022 and technically entering a bull market.
On the other hand, the gap between Bitcoin and Nasdaq volatility has reached the highest level ever since the collapse of the crypto exchange FTX in November 2022. The report from Kaiko explains:
The surge in BTC volatility is partly liquidity-driven, as market depth remains at a multi-month low. It’s unlikely to go away as the largest and most liquid exchange, Binance, now faces regulatory pressures that could exacerbate risk aversion among market makers.
As we reported, Bitcoin could experience greater volatility ahead this month as liquidity dries up majorly.
One of the most common debates currently taking place within the economic sphere is what constitutes the best inflation hedge. You know, because a KitKat Chunky nearly costs more today than a two-bed apartment did this time five years ago.
Old-school investors still argue gold is the best hedge, which traditionally is the ultimate way to protect oneself against a depreciating currency. After all, the shiny metal has been part of almost every human culture throughout history. It’s stood the test of time. Yet its returns since it spiked after the GFC have been lacklustre, to say the least – up only 21% in the last ten years.
The more irreverent investors think there’s a new kid on the block, first name Bit, second name Coin. Is Bitcoin digital gold? Is it a superior store-of-value than the OG king that is gold? The bulls argue that Bitcoin’s (outrageous) outperformance of gold over the last decade highlights its superiority. Then again, amid the highest inflation environment in recent memory, gold is up 3% YTD, while Bitcoin is down 17%. So, what gives?
What About Both?
Well, the good news is that, like a wise politician, we can sit on the fence. Because today a novel exchange-traded product has been launched on the Swiss SIX Stock Exchange which combines Bitcoin and gold. It’s the first combined gold/bitcoin exchange-traded product in the world, and has been developed by crypto ETF provider 21Shares, in partnership with crypto data provider ByteTree Asset Management.
Even the ticker symbol is an amalgamation of the two assets – BOLD. The issuing firms stated the ETP will provide “protection against inflation, giving optimal risk-adjusted exposure to bitcoin and gold”. What is that breakdown? It’s 81.5% gold and 18.5% Bitcoin, and will “rebalance monthly according to each asset’s inverse historical volatility”.
“BOLD seeks to take away the hassle of personally managing the two assets while imposing a disciplined process when it comes to delivering higher risk-adjusted returns”, 21Shares CEO Hany Rashwan said.
Asset Characteristics
It’s an interesting concept. Of course, investors can simply invest in gold and Bitcoin in their desired proportions, but that’s the case with most ETPs. It gives an automated, easy exposure to both assets, and the risk-weighted adjustment is a neat feature. It may also make it easier for certain institutions to gain Bitcoin exposure, as regulatory barriers to the cryptocurrency remain in place for several entities.
Novice investors can rotate into assets outside the traditional stock/bond sphere, both of which have been getting hammered amid the high-inflation environment. Typically negatively correlated, stocks and bonds have both been suffering recently, which has been the case throughout history when inflation soars past manageable levels.
With a large portion of investors still intimidated by Bitcoin, and hesitant to fully embrace its volatile nature, the BOLD ETP is a nice avenue to gain exposure to Bitcoin in a moderate capacity. With its high risk/return profile combined with gold’s more conservative price action, it’s no surprise 21Shares have chosen to launch the product – which amounts to the 30th digital asset ETP that the innovate firm has brought to market.