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BTC The correlation between Bitcoin and gold has risen to its highest level since the 2020 epidemic, and its correlation with Nasdaq has weakened significantly.
The correlation coefficient between Bitcoin, a leading cryptocurrency, and gold, the largest financial asset, has climbed to its highest level since the 2020 epidemic, while its relationship with the Nasdaq index has weakened significantly. The shift comes as concerns about U.S. debt, deficit and currency devaluation are back in the market's focus.
Closer to gold
This change began with a rally in mid-August, when the U.S. Treasury Department announced that it would double the maximum size of long-term treasury bond liquidity-backed repurchase from at least $2 billion to $4 billion each time, boosting market sentiment. In just a few days, the price of Bitcoin soared from below $65,000 to more than $80,000, while the price of gold also rose from $4,350 to $4,700 per ounce, before encountering a retreat in resistance.
Analysts at Kobeissi Letter pointed out that with the implementation of the Ministry of Finance's measures, the correlation between Bitcoin and precious metals has accelerated. Investors increasingly view both as protective tools against currency devaluation, although gold gave up some of its gains in the process. Zach Pandl, research director at Grayscale, also supports this view, saying recently that the correlation between Bitcoin and gold has risen from near zero at the beginning of the year to more than 50%. At the same time, the relationship between Bitcoin and the Nasdaq index showed an opposite trend.
As U.S. federal debt crosses the $40 trillion mark, government deficits persist, and concerns about the long-term purchasing power of fiat currencies intensify, the "debasement trade" has once again attracted attention. Bitcoin and gold both have limited supply characteristics, which is attractive to investors under this logic, although Bitcoin is known for its infamous high volatility.
Stay away from Nasdaq technology stocks
The other half of the equation is equally important: the correlation between Bitcoin and the Nasdaq 100 Index has dropped from more than 60% to around 30%-33% over a 90-day period. This is in sharp contrast to the early stages, when Bitcoin often behaved as a high-beta technology asset that rose in tandem with growth stocks when financial conditions were loose, and vice versa.
The rebound in mid-August is a clear negative example: Bitcoin rose more than 20% in a few days, while U.S. stocks performed weakly. Previous reports pointed out that in the previous three months, Bitcoin had underperformed the S & P 500 on about two-thirds of its trading days, but then the trend suddenly reversed.
This divergence suggests that investors increasingly value Bitcoin's scarcity and monetary attributes rather than just viewing it as a speculative and risky asset. However, this major trend change does not mean that its relationship with the stock market has completely reversed. Both asset classes fell after Friday's strong U.S. jobs data, suggesting a rebound in the correlation between the two.
