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Exploring Bitcoin’s [BTC] increasing correlation to gold amid banking turmoil

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Exploring Bitcoin’s [BTC] increasing correlation to gold amid banking turmoil

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  • Bitcoin’s correlation to gold hit a multi-year high of about 50%.
  • BTC’s relationship with equity markets weakened amidst a deepening banking crisis.

Bitcoin’s [BTC] price movement exhibited a strong resemblance to gold in the recent weeks, reinforcing the king coin’s long-supported narrative of being a safe-haven asset.


How much are 1,10,100 BTCs worth today?


As per blockchain analytics firm Kaiko, BTC’s correlation to gold hit a multi-year high of about 50%. On the other hand, its correlation with U.S. stocks dipped considerably, exacerbated by the collapse of high-profile banking entities.

 

‘Digital Gold’ is back!

For a long time, Bitcoin was positioned as the safe-haven asset by proponents, i.e., an asset whose value is anticipated to remain stable or increase throughout economic downturns, something on the lines of a bullion market.

However, during the bear market of 2022, BTC and Gold remained largely aloof while the correlation between U.S. entities and crypto reached all-time highs, prompting critics to challenge the ‘Digital Gold’ argument.

Source: Kaiko

But as evident, its relationship with equity markets weakened amidst a deepening banking crisis, prompting investors to dump bank stocks and explore crypto markets.

Consequently, prices rallied and BTC recorded gains of nearly 24% during March, as per CoinMarketCap. On a year-to-date (YTD) basis, the largest crypto by market cap surged 65%.

The yellow metal, too, made significant gains in the previous month. Spot Gold rose 9% since the collapse of Silicon Valley Bank (SVB) on 8 March, as safe-haven assets attracted more investors.

Source: Trading View Gold Spot/USD

Rise in BTC’s volatility

Another interesting aspect of BTC’s departure from traditional stocks has been its growing volatility. During the latter part of 2022, the coin’s volatility hit a record low and even dipped below equity indices like Nasdaq and S&P 500.

However, with the onset of the bull cycle in 2023, the price exhibited greater price swings in the vertical direction, attracting both bullish and bearish traders.

Source: Trading View; Bitcoin Historical Volatility Index


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Meanwhile, bullish sentiments for BTC gathered more strength as the number of coins held on the exchanges continued to decline. Falling exchange reserves are a strong indication of reduced selling pressure and growing optimism in the market.

At the time of writing, BTC exchanged hands at $28,087.40, gaining 1.26% in 24 hours.

Source: CryptoQuant

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Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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