Earlier this week, Bloomberg revealed interesting information about gold and bitcoin. According to the most recent data, the correlation between gold and bitcoin has increased by almost 100% in the last 3 months alone.
Data shows that over the past year, the correlation between gold and bitcoin was 0.496. From May until the beginning of August, this number has almost doubled up to 0.837. A coefficient above 1 will indicate perfect correlation while a coefficient below 1 complete non-correlation.
Gold and Bitcoin should be carefully watched
Bloomberg highlighted that throughout the last year, the correlation between gold and digital gold has been more or less random. The 2 assets traded inversely roughly 49% of the time. Since the 8th of May 2019, the assets have traded in tandem the mind-boggling 58% of the time.
It’s noted in the article that correlation does not necessarily imply causation. It’s further implied that Tether (USDT) has an immense impact on bitcoin’s price and the overall liquidity of the crypto market.
It’s also mentioned that geopolitical and macroeconomic factors play a huge role in the interpretation of the data. The impact of the escalating trade wars between China and the United States can drastically alter the data over the course of a few days.
This is probably why digital gold is valued so highly at recent times. Bitcoin is more or less becoming a universal safe haven being made even more attractive by its non-sovereign characteristics and unpredictable geopolitical backdrop. Digital gold is quite literally, doing what it was designed to do.
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