Bitcoin's Golden Correlation Signals New Bull Market Cycle
Bitcoin's price surge of 24% in the week ending August 22 has sparked discussion about whether this is the start of a major bull market. According to Benson Sun, author of the article 'Bitcoin's Golden Bloodline Awakens', we may be entering not only a bull market but also a major-cycle bull market.
In the past few years, investors have associated Bitcoin with high-beta tech stocks, but this time around, its correlation with gold has climbed sharply. Since May, the 60-day rolling correlation coefficient between BTC and gold has been increasing, peaking at 0.636 in August. At the same time, the correlation coefficient between BTC and Nasdaq has trended downward.
This rare occurrence of Bitcoin's correlation with gold breaking above 0.6 while its correlation with Nasdaq drops below 0.25 has never happened before in history. This could be a sign that investors are treating Bitcoin as a 'hard asset resistant to devaluation', rather than just a tech stock.
Benson Sun also points out that historically, whenever the gold correlation coefficient rises past 0.4 from lower levels after a significant drawdown, it has almost always marked a major bottom zone in the market.