Bitcoin's Gold Link Hits 6-Year High as Tech Correlation Fades

The correlation between Bitcoin and gold has reached its highest level since the pandemic in 2020. Analysts at the Kobeissi Letter argue that this shift is due to investors treating both assets as protection against currency debasement, despite gold losing a major chunk of its gains.

The increase in the bitcoin-gold correlation started after the US Treasury's announcement to double the maximum size of liquidity-support buybacks for longer-dated government debt. This led to a significant rally in Bitcoin from under $65,000 to over $80,000, while gold rose from $4,350/oz to $4,700/oz before being rejected.

Grayscale's Head of Research, Zach Pandl, notes that the bitcoin-gold correlation has climbed from near zero at the beginning of the year to over 50%. In contrast, the correlation between Bitcoin and the Nasdaq 100 has weakened significantly, falling from over 60% to around 30%-33%.

This divergence suggests investors are increasingly valuing Bitcoin for its scarcity and monetary properties rather than treating it as a speculative risk asset. However, this trend change does not mean that the relationship with equities has fully flipped, as seen in the recent reaction to the strong US jobs report where both asset classes slipped.