As a seasoned crypto investor with a deep understanding of the market, I find the growing correlation between Bitcoin and Gold to be an intriguing development. Over the past few years, I’ve witnessed how these two assets have moved in tandem more frequently, especially in times of economic uncertainty.
The connection between Bitcoin and Gold has been strengthening over the past few weeks, as indicated by the increasing correlation between their prices over the previous 60 days.
Bitcoin Has Been Becoming Increasingly Correlated To Gold Recently
In his newest entry on X, Kaiko explores the current connection between Bitcoin and Gold prices. The term “correlation” signifies the degree to which these assets’ price movements influence each other.
When a positive value for this indicator occurs, it signifies that one asset’s price behavior is mirroring that of another asset, moving in the same direction. As the value approaches 1, the correlation between their price fluctuations becomes increasingly robust.
As an analyst, I would interpret negative values of the metric as an indication of a reverse relationship between the two assets. In simpler terms, when one asset experiences a change in value, the other asset responds by moving in the opposite direction. This negative correlation implies that they tend to behave in a contradictory manner towards market movements.
In simple terms, a correlation of 1 indicates a strong positive relationship between two variables, while a correlation of -1 represents a strong negative relationship. The absence of correlation is signified by a value of 0.
In statistical analysis, two variables are referred to as “unrelated” or “unscorered” when no relationship between their values exists. This implies that a change in one variable does not influence the value of the other variable.
As a data analyst, I’d like to share some insights based on this chart depicting the 60-day correlation trend between Bitcoin and Gold over the past few years.
The correlation between Bitcoin and Gold, as shown in the graph above, turned negative towards the end of 2023, indicating that their prices were moving in opposite directions slightly.
Over the past few months, the connection between the two assets has strengthened as the indicator’s value has increased. Currently, their correlation stands at a modest 0.1 or below.
In 2022, the indicator reached almost 0.5 at its peak. However, its current value has yet to approach that level, signifying a significant gap between the two.
As an analyst, I would advise that you pay close attention to the correlation between potential investments when considering expanding your portfolio. Correlation refers to the degree to which two assets move in relation to each other. When assets have a strong correlation, it implies that they tend to perform similarly under given market conditions. Consequently, adding highly correlated assets may not provide effective diversification benefits since they will merely mirror each other’s performance.
If the investment in Bitcoin or Gold remains limited for some investors, considering the addition of the other asset could bring potential benefits to their portfolio.
BTC Price
At the time of writing, Bitcoin is trading around $68,700, up nearly 2% over the last 24 hours.
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2024-05-31 08:11