Bitcoin and Gold, the eternal struggle

The correlation between the two safe haven assets tightens with a first-round going to Bitcoin, although Gold is promising a battle.

Bitcoin and Gold as safe-haven assets

Protecting oneself in times of a bear market is always a good thing, and what better way to do it than by directing part of one’s resources into safe-haven assets, i.e., those assets that maintain a certain value over time (even in dark times) and even increase it.

Major inflation such as we are experiencing around the world only exacerbates the problem of the erosion of accumulated wealth and further pushes people to protect themselves despite an aggressive central bank policy that is tentatively showing positive signs.

The monetary policy of Jerome Powell‘s Federal Reserve, Christine Lagarde’s ECB and other central banks is hitting the cost of living to the tune of 50 to 75 basis point rate hikes, yet the results so far are not enough to contain the damage, and this is where the protection of savings comes in.

Bitcoin’s limited quantity, its behavior over time, and its characteristics liken it since its inception to Gold in its role as a durable asset that increases in value in uncertain times.

At CNBC’s microphones, Galaxy Digital CEO Mike Novogratz said:

“We’ve had tremendous deleveraging and I believe most of that reduction is now out of the system.”

The Kraken exchange, in its report on the subject adds:

“The increase in correlation signals a broader trend of correlations between all rising asset classes amid significant macroeconomic uncertainty.”

The deleveraging of BTC according to most analysts has bottomed out and the crypto world may know a better trend from here on out, evidence of this is precisely the digital currency’s re-entry to the $20,000 mark with resilience and recovering volumes now that the ETH Merge has passed.

Bitcoin’s halving and correlation with Gold

Moreover, it is important to consider the fact that although it is still a long way off in time, despite the macro situation distracting us, Bitcoin’s halving is beginning to crowd investors’ dreams, at least as much as the long-awaited end of the bear market.

Each time 2016 blocks are mined the difficulty is modified so that the block-time remains fairly close to 10 minutes.

Every 210,000 blocks a halving occurs and the next one (margin of error permitting) is scheduled for May 2024.

Historically in the times leading up to the halving there is a considerable increase in the price of Satoshi’s currency.

Despite the bear market, analysts agree that Bitcoin (BTC) is an excellent safe-haven asset as reported in research by BAC.

According to Bank of America (NYSE:BAC) digital analysts, the correlation between the digital currency and Gold (XAU) is an important signal highlighting investors’ interest in BTC at a time of economic crisis.

The precious metal, which has always been used as a hedge against inflation, is increasingly correlated with Bitcoin this year, so much so that it has reached its highest level in two months.

Alkesh Shah and Andrew Moss, digital strategists at Bank of America pointed out that since 5 September there has been a gradual increase in this effect, since June 2021 this unit of behavior between the two assets was close to zero and had even veered into the negative in March 2022.

During Tuesday’s US session, Gold futures are up sharply.

Gold futures for December in the Comex division of the New York Mercantile Exchange are trading at $1.00 per troy ounce with an increase of 0.30% on the daily.

A positive trend in the precious metal would be above $1,750 to $1,755 according to analysts who predict this as the most likely scenario for Gold’s future.

Bitcoin finally recovered the $20,000 countervalue ($20,271) with a +4.8% increase while Ether rose as much as 11.1% to $1,494, at the highest since the recent Fork.

There is no shortage of outsiders, but they are not the same thing

Fighting inflation and thus protecting one’s assets also comes through other avenues although none offer greater guarantees than the pair described above.

An almost granite-like constancy can be credited to The Coca-Cola Company, whose stock marks another +2.5%, hitting its corporate targets and raising the bar for 2022.

In addition to resting on a solid foundation that also certifies its value in the stock market, the company is famous for its coupons, which are historically as certain as the sunrise and entice investors in no small measure to bet on the stock. 

The housing market is losing the saving role given to bricks and mortgages over time, rising mortgage rates are putting many investors out of the market, and house prices are increasingly slowing their growth to the point of equaling inflation and thus coming in handy to maintain the status quo in the short run but not in the long run as the trend shows no sign of ending.

The increase in real estate prices was only 13% in August year-on-year, 15.6% in July and 18% in June and the trend continues with a gradual decline of about 2.5% month-to-month according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index.

Silver, rose 0.91% for year-end delivery on Comex and is trading at nearly $20 per troy ounce while out of the picture is copper down 0.74% and trading at $3.41 per pound.