Standard measure of bitcoin-gold correlation goes to zero

Bitcoin and gold are both booming in a global bull market that has seen Total World Indices soar a staggering 28% in the past 12 months. With both assets at or near all-time highs, many traders might understandably assume that they’re correlated.

In reality, however, gold and bitcoin are less correlated than ever. Unlike gold, which is at all-time highs, bitcoin is actually 6% lower than its own all-time peak.

Moreover, a standard correlation value of bitcoin to gold has fallen from over 50% four years ago to nearly 0 today. Indeed, if traders look at a 90-day smoothed price chart of bitcoin and gold, they will find fewer similarities than ever.

Specifically, in October 2020, bitcoin’s average daily returns over rolling 90-day periods used to have a positive, 50% correlation to the rolling 90-day returns of gold. Nowadays, however, bitcoin trades completely independently of gold.

Bitcoin’s 90-day correlation to gold is currently just 0.04.

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Correlations can range from 1 — a perfect correlation where two assets always rally together — to -1, which is a perfectly negative correlation where two assets always trade in opposite directions.

Bitcoin’s 0.04 correlation to gold means that the average returns of gold have almost no impact on the average returns of bitcoin over a rolling three-month period. If bitcoin is digital gold, as has been claimed, it certainly hasn’t been trading like it over the past 90 days.

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