The correlation between Bitcoin and gold has increased in 2023, as indicated in a recent report from asset manager Fidelity.
According to Fidelity analysis, the Bitcoin price has broken away from its previous inverse relationship with interest rates and has even recovered despite rising global interest rates around the world – high interest rates tend to reduce demand. demand for risky assets. Over the past 12 months, gold prices have followed a similar pattern:
“But over the past year, we have seen a complete decoupling as real interest rates continued to rise (with inflation falling and Treasury yields rising at the fastest rate in history), and Bitcoin is not only holding steady but also increasing in price! Could this be due to an idiosyncratic event, such as the prediction of a spot ETP? Maybe. But we don’t think so, because gold has been showing similar behavior recently.”
In 2023, gold experienced significant volatility but overall showed strong performance compared to some currency. Over the past year, gold’s performance in US dollars has increased by 14.6%, with notable differences between different currency pairs. Asset performance is largely driven by geopolitical risks and central bank demand. Meanwhile, Bitcoin is up 156% in 2023.
“Historically, Bitcoin has been relatively uncorrelated with gold over the long term, but has recently shown an increase in correlation as both have increased in price.”
The investment firm speculates on the reasons for the growing correlation between commodities, saying investors may be tracking the growing US fiscal deficit or even predicting a change about interest rates.
“We can only speculate what this real asset market might say, but one possible explanation is that both Bitcoin and gold think the bond market might be wrong or both assets are sniffing something else, such as a growing and structural U.S. fiscal deficit. Perhaps the Bitcoin market can anticipate more money from Federal Reserve debt in the future or anticipate interest rate cuts, as our research shows that Bitcoin prices are correlated high not with consumer price inflation but with inflation in the money supply itself and various liquidity metrics.”
Fidelity’s analysis also points to a tighter Bitcoin supply environment, as the number of long-term holders has reached an all-time high of 70%.
“It seems to us that the last few years the bear market has produced some strong hands in terms of holding periods. Even in the face of Bitcoin’s over 160% gain (in mid-December), we have yet to observe these long-term and illiquid coins move to take profits.”
Bitcoin maintains independence from traditional market forces in 2023
Data analyzed from January 1 to December 31, 2023, provided by valuable sources Coinbase International and Glassnode.
A recent correlation matrix analysis (with data from January 1 to December 31, 2023) highlights the complex relationship between Bitcoin (BTC/USD) and other financial instruments. The analysis shows a strong positive correlation between BTC/USD and ETH/USD, suggesting that the market trends and investor sentiment that influence the value of Bitcoin also often impact Ethereum.
In contrast, Bitcoin exhibits almost zero or weak correlation with traditional assets such as various indices (S&P 500, MOVE, US Bonds), emphasizing its potential as a diversification tool in a traditional investment portfolio. This behavior shows that Bitcoin’s performance is largely unaffected by the movements of these traditional assets, pointing to its potential for hedging investment risk in traditional portfolios.
However, the analysis also sheds light on Bitcoin’s volatility, demonstrated by its negative correlation with DXY (US Dollar Index). This suggests an inverse relationship, where a stronger dollar can decrease the value of Bitcoin and vice versa. It is important to note that Bitcoin’s interaction with traditional financial markets is multi-faceted, influenced by factors such as investor sentiment, regulatory news, technological developments and trends. macroeconomic direction.
As the digital asset market evolves, the relationships shown in this matrix may change, reflecting Bitcoin’s growing influence on the broader financial landscape.
