Bitcoin Correlation with Gold Hits All-Time High, Fuels Bull Market Hopes

The correlation between Bitcoin and gold has reached an all-time high of 0.8 over the past 30 days, according to The Block. This is significant because it matches two prior spikes in the correlation that each preceded massive Bitcoin rallies.

In Q4 2020, the correlation spiked to 0.6 before falling, and Bitcoin gained 172% in the months that followed. In Q4 2022, it climbed from near zero to 0.5, and Bitcoin rallied nearly 350% over the next 14 months.

The institutional flow data also reinforces the debasement trade narrative behind the correlation. Both Bitcoin and gold ETFs sit in the top 10 by inflows, with Bitcoin ETFs drawing nearly $1 billion last week. BlackRock's IBIT leads all individual products with $1.2 billion in year-to-date inflows.

Crypto analyst Benjamin Cowen argued that gold is in a normal mid-cycle pullback, not a secular top. He believes that 30% drawdowns have appeared in prior gold bull markets without ending the trend. His base case follows the 1974 playbook: gold drops, rallies, pulls back into September or October for a higher low, then hits new all-time highs by year end.