Bitcoin Has Been Becoming Increasingly Correlated To Gold Recently

Data shows the relationship between Bitcoin and Gold has been growing deeper recently as their 60-day correlation has been riding an uptrend.

Kaiko has covered a new trend in its latest post on X. The post discusses the changing correlation between Bitcoin and Gold. This metric measures how closely the prices of two assets are linked on a scale.

When the value of this indicator is positive, it indicates that one asset is responding to the price movements of the other by changing in the same direction. A value closer to 1 indicates a stronger correlation between the two prices.

Negative values ​​of this metric also indicate that there is some kind of relationship between the two assets, but in this case the correlation is negative. This means that the assets react to movements in each other by moving in opposite directions.

Just as 1 marks the extreme for positive correlation, -1 corresponds to the point where negative correlation becomes strongest. Of course, when the metric is exactly between these two extremes, that is, at the zero mark, it indicates that there is no correlation at all between the assets.

In statistics, the two variables are said to be “independent” of each other when this condition develops. Independent variables are not affected by changes in each other.

Here is a chart showing the trend in the 60-day correlation between Bitcoin and Gold over the past few years:

As shown in the graph above, the 60-day Bitcoin correlation to Gold had plunged into the negative territory by the end of 2023, as the two showed slight movements in opposite directions.

However, in the past few months, the indicator has seen an uptick in its value and now shows a positive relationship between the two assets. Currently, this correlation is still relatively low, with the metric being below 0.2.

Back in 2022, the indicator had reached a high of almost 0.5. Clearly, despite the recent increase in the indicator, its value is still quite far from this mark.

In general, correlation is something to consider when an investor is trying to decide whether to add an asset to their portfolio. Highly correlated assets do not serve as good diversification options, as they will only follow the performance of another asset.

Given that Bitcoin and Gold still have the metric at relatively low levels, investors in one of the assets may find it beneficial to add the other to their portfolio.

BTC Price

At the time of writing, Bitcoin is trading around $68,700, up nearly 2% over the last 24 hours.