Bitcoin Breaks Its Ties: Negative Correlation With Gold and Silver Hits Historic Lows According to Glassnode

  • Recent data from Glassnode reveals a significant drop in the correlation between Bitcoin and gold/silver, indicating a decoupling of Bitcoin from these traditional commodities.
  • The correlation index has reached historic lows, with Bitcoin showing a negative correlation of -0.78 with gold and -0.90 with silver.
  • The divergence in correlation is attributed to the recent price movements, with gold and silver experiencing a downward trend while Bitcoin has seen a strong rally. This shift raises questions about whether Bitcoin will continue to move independently from these assets in the future.
bitcoin

In a remarkable twist to the ever-evolving narrative of the global cryptocurrency markets, recent data analysis from on-chain analytics provider Glassnode reveals a precipitous drop in the correlation between Bitcoin, gold, and silver – a development with significant implications for South Africa’s crypto community.

Bitcoin’s Relationship with Gold and Silver Takes a Sharp Turn

The correlation indicator, a vital metric used to decipher how closely Bitcoin’s price movement aligns with that of other commodities, has recently painted a peculiar picture – a stark negative correlation with gold and silver. This correlation index gives us insights into Bitcoin’s behaviour in relation to other assets over a defined period, in this case, a span of 30 days.

When the correlation indicator showcases a positive value, it suggests that Bitcoin’s price movements are mirroring those of the corresponding asset. Conversely, a negative value implies that Bitcoin’s price trajectory is moving in the opposite direction to the other asset’s trend. The magnitude of this indicator, whether positive or negative, depicts the intensity of Bitcoin’s response to the other asset’s price fluctuations.

Interestingly, there are periods when the correlation metric could hit a null value, essentially when no obvious price pattern emerges between the two concerned assets. For instance, when one asset experiences significant volatility while the other remains relatively stable.

Glassnode’s data presents a fascinating graph that displays the trend in Bitcoin’s 30-day correlation with gold and silver over recent years. This visual aid underscores a significant plunge into the negative territory for Bitcoin’s correlation with both assets – down to -0.78 with gold (XAU) and an even steeper dive to -0.90 with silver (XAG).

When it comes to gold, Bitcoin’s correlation is teetering on the cyclical lows, and as for silver, the correlation index has already hit a new cyclical low.

What’s Behind this Sudden Shift?

The catalyst behind Bitcoin’s pronounced negative correlation with these commodities is attributable to the contrasting market scenarios. While the prices of gold and silver have recently been on a downward trajectory, Bitcoin has witnessed a striking rally in the same timeframe.

The current values of the 30-day correlation represent a significant divergence from the trend observed earlier this year. Except for a brief period between late February and early March, Bitcoin had been closely mimicking the movements of these traditional assets since the bull market kickstarted in January 2021.

This raises an intriguing question: Will Bitcoin continue to chart its course independently from these commodities in the future, or is this deviation temporary, much like the episode experienced earlier this year?

South Africa Watches Closely

As South Africa progressively navigates its digital economy, these international developments could offer substantial insights. This particularly holds true given the growing interest in cryptocurrencies amongst South Africans and the country’s unique economic landscape. The divergence between Bitcoin and traditional assets such as gold and silver, for instance, may spur discussion around the perceived digital gold’s independent store-of-value credentials and its role in diversifying investment portfolios in South Africa.

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