The monthly average correlation between Bitcoin and gold has hit a record 70%, according to data from analytics firm Skew. This surpasses the previous peak of nearly 60% seen in the second quarter of 2020. Skew noted that the rising correlation supports Bitcoin's narrative as a store of value, particularly during times of economic uncertainty.
'Money Printer Go Brrr' Era Drives Co-Movement
In a tweet, Skew stated: 'Bitcoin/Gold 1-month correlation reaching new all-time highs, giving momentum to the store-of-value narrative for BTC in these money printer go brrr times.' Both assets have surged in 2020, driven by unprecedented fiat money printing by governments and central banks to combat the economic fallout from the COVID-19 pandemic. Bitcoin reached a yearly high of $12,000 in August 2020, while gold soared to a record $2,000 per ounce.
Vaccine News Triggers Dual Selloff, Reinforcing Correlation
On August 11, Russia announced the approval of a COVID-19 vaccine, triggering a sharp decline in both assets. Bitcoin fell more than 3.9% to as low as $11,200, while gold tumbled 4.7% to $1,932 – its worst single-day drop in seven years. This synchronized decline further confirmed the strong correlation between the two.
Robert Kiyosaki, author of 'Rich Dad Poor Dad,' commented that the price drop represents an opportunity for 'investors' to buy hard assets. 'Real problem is massive debt and weak economy. Fed must print. I am an investor. Great time to buy more gold, silver and bitcoin,' he told his 1.4 million Twitter followers.
Weakening Dollar and the Rise of Digital Gold
The economic damage from the pandemic has prompted trillions of dollars in stimulus, leading the U.S. dollar index to fall about 3% year-to-date, which in turn boosted safe-haven assets. Bloomberg, in an earlier report, forecast that Bitcoin would mature into a gold-like store of value in 2020. With its correlation to gold reaching all-time highs, BTC is transitioning from a risk-on speculative asset to the crypto market's version of the metal, according to Bloomberg.
As digital gold, Bitcoin appeals to the cashless internet economy due to its features such as 24/7 price transparency, lack of limits or interruptions, and absence of third-party oversight. Going forward, continued central bank money printing is likely to keep the Bitcoin-gold correlation elevated, further solidifying BTC's role as a macro hedge.
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