Bitcoin and Gold Diverge as BTC's Meteoric Rise Precedes a Recent Pullback

From November 2022 to November 2024, gold and bitcoin moved in a relatively tight correlation, with gold gaining 67% while the more volatile bitcoin surged nearly 400%.

After moving in a relatively tight correlation for November 2022 to November 2024, gold and bitcoin prices diverged sharply this year, a trend that may continue in the coming months.

Top traders at CME Group, Inc. (NASDAQ:CME) discussed the factors that could influence the next move in the two assets.

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Gold vs Bitcoin: What's Happening?

From November 2022 to November 2024, gold gained 67%, while the more volatile bitcoin surged nearly 400%. Analysts widely believed that the two assets would continue to move in tandem, given their shared status as hedges against weak global currency policies. However, this relationship began to fray in 2025.

As of late March, gold has risen 16%, while bitcoin has fallen by more than 6%.

Bitcoin's Rise And Recent Pullback

Bitcoin's meteoric rise over the past three years can be attributed to several factors, including growing institutional adoption. Major participants such as BlackRock (NYSE:BLK), VanEck and Fidelity have increased their exposure to the cryptocurrency market, while countries like El Salvador have embraced bitcoin as a key financial tool.

The U.S. government has also unveiled preliminary plans for a strategic crypto reserve, further solidifying bitcoin's position. Additionally, the introduction of new financial instruments, such as CME Group's Bitcoin Friday futures, which offer contracts as small as 1/50th of a coin, has made it easier for retail investors to participate in the crypto market.

These developments have not only driven up demand but also enhanced bitcoin's durability through broader institutional entrenchment.

However, bitcoin has pulled back sharply in recent months, which can be attributed to two primary factors.

Firstly, much of the positive news that fueled bitcoin's rise had already been priced in by the time it reached its peak of $109,000 in mid-January. The adage "buy the rumor, sell the fact" often holds true in financial markets, where speculators buy into an asset ahead of anticipated news and then sell once the news is confirmed.

This can lead to a simultaneous rush to liquidate long positions, driving the asset's price in the opposite direction.

Secondly, bitcoin retains a strong correlation with the Nasdaq, a relationship that remains confounding to many traders but easily explained by others. Many institutional trading desks often group volatile assets like the Nasdaq and bitcoin into the same portfolio, assuming a Nasdaq traders' expertise in handling volatility equips them to manage bitcoin's price swings.

Consequently, a sharp decline in the Nasdaq often triggers sales of bitcoin to cover margin requirements.

Also Read: Is Bitcoin Bottom In Yet? Key Levels To Watch This Week

Gold's Resurgence

The recent strength in gold can be attributed to a combination of economic uncertainty, rising inflation expectations and a shift in central bank policies.

Economic uncertainty has traditionally pushed investors toward gold as a safe haven, a trend that has clearly gained traction. Additionally, the Federal Reserve's potential shift toward easing monetary policy, rather than tightening, has further bolstered gold's appeal.

However, a key driver of gold's recent performance is the unprecedented rate at which global central banks, particularly those in China, India and Russia, have been stockpiling the metal. According to the World Gold Council, these central banks have been purchasing over 1,000 metric tons of gold annually over the past three years.

This accumulation reflects a strategic move away from holding reserves solely in U.S. dollars - a response to actions taken following Russia's invasion of Ukraine, which froze dollar-denominated assets and excluded Russia from the SWIFT payment network. This shift may have accelerated in recent months due to perceived adversarial U.S. trade and tariff policies, prompting key trading partners to diversify their reserve instruments.

While the change is modest, it is significant: the share of dollar reserves among global central banks has dropped from over 60% in 2022 to 57% today.

Moreover, gold's strength may be partly a result of bitcoin's weakness. The total market capitalization of cryptocurrencies, estimated at around $2.8 trillion, has pulled money away from the more traditional dollar hedge of gold. It would stand to reason that if bitcoin was in a period of weakness, perhaps investors seeking safety and stability might turn to gold, which has a history spanning thousands of years as a reliable store of value.

The Maturation Of Bitcoin

One aspect that cannot be overlooked is the historical context of the two assets. Gold has been a store of value since ancient Egypt in 4000 B.C., while Bitcoin's history dates back only to 2011.

Many argue that Bitcoin still has