As Bitcoin's association with gold strengthens, both assets are becoming increasingly popular among investors looking for stability amid inflation and global economic unrest. According to Ki Young Ju, CEO of CryptoQuant, the correlation between Bitcoin and gold has surged past 0.85, reflecting a growing perception of these assets as safe havens.
In a recent post, Ju highlighted that this correlation has intensified parallel to gold reaching new record highs. "Gold continues to hit new all-time highs, and the BTC-gold correlation remains strong. The narrative of digital gold is very much alive as the demand for inflation hedges persists," he commented. Data from CryptoQuant reveals that the correlation, which was negative in October 2021, has now climbed to over 0.85, nearing a previous peak of 0.9 reached in April last year.
Andrei Grachev, a managing partner at DWF Labs, underscores that this pattern signifies how institutional investors view Bitcoin. "Capital is naturally shifting towards assets seen as stable stores of value," he explained. Grachev likened Bitcoin's evolution to that of gold, which transitioned from a conventional currency to a wealth preservation asset. "Bitcoin seems to be on a similar path, explaining why its price trends increasingly mirror those of gold," he added.
Ben Elvidge, head of commercial applications at Trilitech, noted that Bitcoin is currently more valuable as a store of value than a transactional medium, largely due to its finite supply boosting its potential for value appreciation. "Its potential for capital gains overshadows its functionality for payments," he stated.
On the commodity front, gold prices recently soared to an unprecedented $4,179.48 per ounce, with spot gold rising 0.5% to $4,128.49. U.S. gold futures for December delivery also rose to $4,158, marking a 57% increase this year driven by geopolitical tensions. Silver similarly reached a record $53.60 before settling at $52.27, reflecting an impressive 85% gain this year, surpassing gold's performance.
This surge in precious metal prices coincides with financial institutions leaning into the "debasement trade," investing in assets that protect against the erosion of purchasing power due to ongoing money printing. Entrepreneur Anthony Pompliano recently pointed out that institutions are increasingly acknowledging the perpetual nature of monetary expansion, fueling interest in hard assets.