Bitcoin and Gold Correlation Reaches 6-Year Peak Amid Inflation Fears

Bitcoin Magazine

Bitcoin-Gold Correlation Hits Six-Year High as Debasement Fears Mount

The correlation between Bitcoin and gold has reached its highest level in six years as market participants increasingly seek protection against currency debasement.

A recent report from Bitwise highlights that the premier cryptocurrency and the precious metal are moving in tandem because the U.S. government has “materially intervened in the macro picture.”

Bitcoin began a strong upward movement last month after the U.S. Treasury Department announced plans to more than double its government debt repurchases, leading to the coin’s best performance in three years and its third-best August on record.

“The last time the bitcoin-gold correlation was that high was in 2020, following the rounds of fiscal and monetary stimulus during the Covid crisis,” noted André Dragosch, European Head of Research at Bitwise.

Dragosch also noted that Bitcoin’s correlation with equities fell to a one-year low, “implying some kind of decoupling between hard assets and the stock market.”

Although Bitcoin has long been marketed as “digital gold,” it has historically traded alongside technology equities as a “risk-on” instrument.

However, the debasement trade—whereby investors acquire assets to safeguard against declining currency purchasing power—was a prominent strategy last year and appears to have made a strong return.

Dragosch attributes this shift to market intervention by the government. When the Treasury revealed plans to moderate long-term borrowing costs, the U.S. dollar weakened, prompting capital to flow into both gold and Bitcoin.

During that same week, the Treasury disclosed that total U.S. public debt surpassed $40 trillion for the first time, with mounting debt further eroding trust in the dollar.

“Investors are no longer asking whether to hedge currency debasement with gold or bitcoin. They’re simply hedging with both,” the publication of the report stated.

“Bitcoin spent its first fifteen years being priced as a risk asset. If this correlation trend with gold holds, the next fifteen may look very different.”

The leading cryptocurrency experienced another rally this week, recently changing hands near $81,438 following a nearly 6% gain over a 24-hour window.

FAQ

What is the Bitcoin-gold correlation?

According to a Bitwise report, Bitcoin’s correlation with gold reached a six-year high as investors seek hedges against currency debasement.

Why is the correlation rising?

The correlation is rising due to U.S. government intervention in the macro picture, including Treasury debt repurchase plans and public debt surpassing $40 trillion.

How is Bitcoin performing compared to stocks?

Bitcoin’s correlation with the stock market has dropped to a one-year low, indicating a decoupling between hard assets and equities.

What is the current price of Bitcoin?

Bitcoin was recently trading close to $81,438 after climbing nearly 6% over a 24-hour period.