Analyzing correlation between Bitcoin, gold, and Nasdaq.
Some news sources have been comparing Bitcoin’s price movements to other assets, particularly gold and tech stocks. When a correlation exists, it often becomes a major news story. Previously, Bitcoin’s correlation with tech stocks was prevalent, but since that correlation broke down, there hasn’t been much news coverage. Now, a new narrative has taken the spotlight: Bitcoin’s correlation to gold. Ever since the failures of Silvergate, Signature Bank, and Silicon Valley Bank in March, both assets have rallied. Both of these correlations make sense on the surface. If Bitcoin is seen as a speculative asset, then it might trade similarly to a tech stock. And if Bitcoin is more of a safe-haven asset, a correlation to gold seems reasonable.
However, it’s important to note that correlations can come and go, and just because two assets share a correlation for a time, it doesn’t always mean they share a place in the market long-term. Examining both of these correlations on a one-year basis, Bitcoin has gained roughly 58%, while the NASDAQ has gained about 36% and gold has risen by just over 7% YTD. According to the 90-day correlation coefficient, BTC is positively correlated to gold (0.58) and negatively correlated to tech stocks (-0.65) right now. So, the question arises: is Bitcoin’s correlation with gold a safe-haven correlation or a risk asset correlation? Or does the presence of multiple correlations point to no correlation at all? When looking at the question in terms of percentage gains, things look even more different: gold is up 9%, while Bitcoin is up 18% and the NASDAQ 30%. Over the past 14 years, Bitcoin has risen against the US dollar by tens of millions of percentage points. Other assets don’t carry the same degree of volatility, making a long-standing correlation even less likely.
The main points to consider here are:
- PEPE up 34% in market rebound.
- Binance launches regulated crypto platform in Kazakhstan amidst Western regulatory issues.
- Binance offers no maker fees for TUSD trading pairs, is TUSD the next stablecoin?
- An asset that increases by more than 50,000,000% throughout its lifespan may not be related to much else.
- The connections between Bitcoin, gold, and technology stocks are often not visible over periods longer than one or two years.
- Because of the first two points, the connections are not very significant.
Investors should keep this in mind when analyzing markets. Relying on any specific correlation as part of a strategy could be dangerous, as that correlation could fail at any moment.
