Bitcoin-Gold Correlation Strengthens as Gold Nears $4,100

Gold’s record run and Bitcoin’s closer link show people are trusting both to protect their money from rising prices.

The stronger connection between Bitcoin and gold shows more investors now see Bitcoin as a real store of value.

If gold prices drop soon, some money could move into Bitcoin, giving it more strength as “digital gold.”

Gold is setting new all-time highs, driving renewed discussion on its growing correlation with Bitcoin. According to Ki Young Ju, CEO of CryptoQuant, “Gold keeps hitting new ATHs. BTC-Gold correlation is high; digital gold narrative still alive. Inflation hedge demand isn’t dead yet.”

Since 2010, there has been significant volatility in the relationship between Bitcoin and Gold, but it has recently regained its vigor. Bitcoin established itself as a digital store of value in the early years of cryptocurrency by maintaining a strong positive correlation with Gold, surpassing 0.4. However, during 2013 and 2014, the relationship sharply reversed, with correlation falling below negative 0.5 as Bitcoin became an independent asset class.

Shifting Correlations and Market Dynamics

According to the chart, from 2015 to 2018, their relationship was quite dynamic, with the two sometimes moving in sync and other times going in completely opposite directions.

Source: Ki Young Ju

The fluctuation is usually a show that investors were feeling uncertain and frequently reassessing their views on both assets. However, starting in 2023, the connection between them strengthened once more

Notably, Gold has increased from around $800 per ounce in 2010 to nearly $4,000 in 2024 the data shows, which is a fivefold increase. This surge suggests that investors are still seeking stability during times of monetary expansion.

Speculative Bubble Signs in Gold

However, short-term risks in Gold markets tell a different story. On different data, after $4,000, Gold prices appeared to form a mini speculative bubble. Prices dipped slightly to $3,900 before rebounding toward $4,100 within days. This fast swing indicates overheated trading activity that could lead to a short-term correction.

If this bubble bursts, analysts believe some capital may flow from Gold into Bitcoin. Such movement could reinforce Bitcoin’s “digital gold” narrative and extend its bullish correlation with precious metals.

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