According to Decrypt, the correlation between Bitcoin and gold prices has climbed to new heights in recent months, reaching a current level of 0.76 (or 76%). This tightening relationship between the two assets, both considered strong stores of value by their proponents, comes as Bitcoin increasingly inhabits aspects of mainstream finance. The Bitcoin-gold correlation has fluctuated throughout much of the digital asset's history but grew tighter after the market crash in 2020 at the start of the COVID-19 crisis.
Bitcoin's correlation to gold witnessed a notable surge, sitting at approximately 75% by the end of 2023, coinciding with global central banks adopting interest rate hikes and signaling a temporary shift in stock market behaviors. The introduction of Bitcoin ETFs in the U.S. market last week also marked a watershed moment, heralding Bitcoin's transition to a stock-like asset. Despite this, Bitcoin's kinship with gold has only strengthened, with the bitcoin-gold correlation today sitting at 76%, only a few points behind the all-time high of 79%.
The Bitcoin to gold ratio, a metric that results from dividing the price of Bitcoin by that of gold, also climbed steeply throughout 2023, peaking towards the year's end before a slight retracement earlier this month. At its zenith, the ratio touched an impressive 22.5, meaning 22.5 ounces of gold could be purchased with 1 BTC. This figure demonstrates the purchasing power of Bitcoin relative to gold, reaffirming the belief among the Bitcoin faithful that BTC provides a reliable store of value. With the U.S. inflation rate lingering above the desired Federal Reserve target of 3.35%, and Bitcoin's stellar 155% spike in 2023, investors are not just chasing growth; they are also seeking stability in the face of economic uncertainty. Bitcoin, with its gold-like performance, offers a semblance of this stability.
