Bitcoin and Gold have always been considered “store of value” assets, able to serve as safe haven assets in times of market uncertainty or difficult macroeconomic situations.
Bitcoin is often referred to as “digital gold,” precisely because it is considered the virtual version of the classic gold bar.
We will attempt to analyze as best we can what kind of relationship there is between these two assets and whether they are really correlated with each other.
Bitcoin and the correlation relationship with Gold
In recent months Bitcoin and gold seem to be moving hand in hand as fears of a US recession increased when Silicon Valley Bank failed bringing uncertainty and fear to the markets.
The collapse of the US bank brought back memories of the Lehman Brothers collapse on 15 September 2008 and the subsequent subprime mortgage crisis in the United States, which caused disastrous damage to the world economy.
The losers in that context were first and foremost investors and savers, who saw the sacrifices of a lifetime disappear because of the manipulation of a corrupt financial system.
At that time in history, gold was registering one of its biggest price rallies, and in parallel Bitcoin was about to be released to the world, putting itself forward as a decentralized exchange currency capable of staying outside the perverse mechanism of traditional finance.
However, over the years Bitcoin has become less and less established as a currency, given its difficulty in use and high transaction costs, while it has grown stronger and stronger as a value reserve asset.
Perhaps with the expansion of the Lightning Network, Bitcoin will be able to make its case as a trading currency but that is a different story.
Bitcoin is currently seen as “digital gold,” performing the same functions as gold, but in a virtual and decentralized version.
The first quarter of 2023 was largely positive for BTC just as it was for the world’s most famous commodity asset, while the stock market sector failed to keep pace.
In particular, Bitcoin rose from $16,500 to the current $30,000 recording an increase of about 82%. Gold began the year with a price of $1823 an ounce and now sits very close to all-time highs at $1993 marking a 9.3% rise.
According to Glassnode‘s on-chain data, there has been a strong correlation between the price of the two assets over the past 12 months.
The term “Buy Bitcoin” is more searched on google than “Buy Gold” in Nigeria
Bitcoin seems to be more valued in those countries in the world where there is more poverty and where there is an absence of a strong central currency capable of addressing the economic needs of citizens.
Developing countries such as El Salvador have embraced the decentralization philosophy inherent in Bitcoin by electing the cryptocurrency as a state currency.
In this regard, a plan was recently approved in El Salvador to remove the inherent taxation on all technological innovations, including Bitcoin.
Another country where the central currency is struggling to bear the brunt of inflation is Nigeria.
As of June 2016, the Nigerian Naira has lost more than half of its countervalue against the Euro.
Over the years, Nigerian savers have been adversely affected by the weakness of their currency, which is worth less and less abroad, hence they have become increasingly interested in assets that serve as safe-haven assets such as Gold and Bitcoin.
Truth be told, Bitcoin seems to be more highly valued than Gold by the Central African population: analyzing data from Google Trends it is possible to observe that, as of 2016 the term “Buy Bitcoin” was much more searched on the search engine than “Buy Gold”
Bitcoin: is the bear market over?
While gold seems to be approaching new price highs, Bitcoin remains midway between its bottom of the last bear cycle at around $15,500 and its high touched in the last bull cycle at $69,000.
Many are wondering if the bear market is behind us or if future price corrections will cause the leading cryptocurrency to have to revisit its local lows.
The answer is by no means a foregone conclusion and could also depend on the state of the US economy, which seems to be in oblivion between recession risk and market recovery.
In the meantime, inflation seems to have stabilized in the US and the March CPI (consumer price index) data show us that goods prices in America rose less than expected (+0.1% versus expectations of +0.2%).
This means that perhaps inflation may have reached a level that is easily controlled by the Fed and that markets may resume their upward race in 2024 when the US central bank stops its economic slowdown policies.
Meanwhile, returning to Bitcoin, it is interesting to note that stablecoin holdings on cryptocurrency exchanges are falling dramatically, giving a positive signal for the immediate future.
The previous bull market started precisely when stablecoin reserves on exchanges had reached a very low level, around $2 billion in countervalue.
Another very interesting on-chain data to analyze concerns the percentage of BTC held in profit versus those held at a loss.
In 2023, a total of 6.2 million BTC returned to profit, a highly encouraging sign for a bull continuation.
Simplifying, this data tells us that below $30,000 there are many coins that act as support, making it more difficult for a break of that level and consequently a return to a bear market
Source: https://en.cryptonomist.ch/2023/04/19/analysis-comparison-bitcoin-gold/