Bloomberg reported that according to its data, the correlation between Bitcoin (BTC) and gold is at its highest level since 2010. If you look at the charts online that track correlations between the two assets, you will possibly see something that will contradict Bloomberg’s assertion. Yet, it stands at 0.80. The caveat here, however, is that Bloomberg says this metric differently from many other data providers:
“On a 12-month basis, the quasi-currencies are about 0.80 correlated, the highest in our database since 2010.”
Bloomberg analyst, Mike McGlone, further explicated the firm’s calculus:
“Bloomberg default and simple % change function. The % monthly changes on a rolling 12-month basis, past 12-months, the highest in our database.”
Instead of measuring the correlation daily, Bloomberg calculates the interrelation of this data on a monthly basis, and that makes the difference.
McGlone believes that the recent plunge in Bitcoin’s price was driven by the Nasdaq’s dip, and he predicted that if gold maintains the price level above $1,900, he expects Bitcoin to stay above $10,000.
The record-high correlation between the two hedge assets can be a result of the fact that we are experiencing unprecedented economic upheaval in Bitcoin’s short history. The injection of trillions of fiat money into the global economy may be prompting investors to seek shelter in alternative assets.
The strengthening of the positive correlation validates the popular narrative that bitcoin is a store of value and a haven asset. Some investors say it is sound money, like gold.
As such, the cryptocurrency’s sensitivity to movements in risk assets, mainly equities, could lessen.
Bitcoin defended the $10,000 support for the fifth day on Monday, despite losses on Wall Street.
The repeated defense of the support level and several bullish developments in on-chain metrics, suggests scope for a recovery rally.
Bitcoin’s hashrate, or computing power, has risen to fresh record highs near 150 exchashes each second, according to Glassnode.
That suggests miners remain unfazed by bitcoin’s recent plunge from $12,400 to $10,000.
Moreover, the percentage of bitcoin unmoved in over three years has hit a two-year high of 30.91%, according to data source Glassnode.
“It suggests an increase in the holding mentality,” Simon Peters, a crypto-asset analyst at multi-asset investment platform eToro, said.
“The recent drop represents overselling and buyers may soon step back in again,” Peters noted.
The cryptocurrency is trading near $10,200 at time of writing, representing a 0.7% gain on the day.