Is Bitcoin Becoming Digital Gold? An important sign in the markets

Source Link: Is Bitcoin Becoming Digital Gold? An important sign in the markets at a glance is the increase in correlation with gold: the 90-day correlation between Bitcoin and gold has reached 51%, which is the highest level since November 2020. Staying away from US stocks: Bitcoin's correlation with the S&P 500 and Nasdaq 100 indices has decreased to about 40%; This figure was 62% in February. Changing the view of Bitcoin: […] Source site: Safir Arjan

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Gold prices have once again broken above $4,100 per ounce, but the precious metal still faces significant headwinds. Continued concerns about inflation have led to tighter monetary policies around the world. However, gold is not the only alternative asset that has attracted the attention of investors; As they look for ways to protect their wealth against currency depreciation and broader financial market risks.

According to one of the market analysts, Bitcoin is gradually starting to behave like gold. This shows that investors may gradually consider this cryptocurrency not just a risky and speculative asset, but a complementary tool to preserve the value of assets in uncertain conditions.

Rahman, a research analyst at Block Scholes, announced in a note published on Thursday that Bitcoin's correlation with gold has reached its highest level since November 2020; The period when the financial and monetary stimuli of the corona virus epidemic had affected the financial markets.

He added that the performance of this cryptocurrency since the end of summer has raised the debate once again whether Bitcoin has really been able to live up to the narrative of "digital gold" that has been talked about for the past few years or not.

✔️ Read more: Wall Street in ambush for gold; A buying opportunity or the start of a big drop?

"The rise in the 90-day rolling correlation began in June and accelerated in August after the US Treasury expanded its bond-buying program to curb yields on long-dated Treasuries," Rahman said.

In the week after the decision was announced, Bitcoin recorded its biggest weekly gain since March 2024, rising more than 20%. The price of gold also increased by 5% during the same period.

The correlation of these two assets reached a peak of 55% in mid-September; The highest level recorded in our data since 2014. This index is now at the level of 51 percent.

Both Bitcoin and gold have gained attention as attention to investment strategies to counter currency devaluations has increased. With government debt around the world growing at an unsustainable pace and inflation continuing to erode the purchasing power of common currencies, investors are looking more than ever for ways to preserve the value of their wealth.

Rahman's analysis shows that the strengthening of the price relationship between Bitcoin and gold can reflect a change in the way investors look at this cryptocurrency; Especially as concerns about government debt, inflation and monetary policy continue to weigh on financial markets.

He also noted that the renewed interest in Bitcoin comes as investors seek to diversify their portfolios and reduce dependence on the stock market; A market whose valuation has reached unprecedented levels. Although Bitcoin continues to be positively correlated with major stock indices, this relationship has weakened significantly this year.

In this regard, Rahman said: "Bitcoin's 90-day correlation with the S&P 500 and Nasdaq 100 indices is still positive and around 40%, but it has decreased from its peak of 62% in February. Also, since mid-August, Bitcoin's correlation with gold has exceeded its correlation with US stocks for the first time since late 2020.

This issue could be an early sign that the markets in the current situation, where macroeconomic factors play a decisive role, will gradually consider Bitcoin alongside gold as a complementary tool for risk hedging.