Bitcoin and gold’s correlation is the highest it has been in 6 years, as investors look to protect themselves against devaluation.
That’s according According to Bitwise’s new report, released this week, the U.S. Government has imposed a ban on the use of cryptocurrency and the price of gold is trading at the same level. “materially intervened in the macro picture.”
Bitcoin surged last month after the U.S. Treasury Department said It would double its government bond repurchases. This coin has had the best performance in three years. August was also its third best ever.
“The last time the bitcoin-gold correlation was that high was in 2020, following the rounds of fiscal and monetary stimulus during the Covid crisis,” Bitwise’s European Head of Research, André Dragosch, wrote.
The correlation between bitcoin and the stock exchange has dropped by an entire year. “implying some kind of decoupling between hard assets and the stock market.”
Bitcoin is being marketed as “digital gold” For years, but sometimes trades with tech shares as a “risk-on” asset.
But the so-called debasement trade — when investors buy an asset as a way to hedge against a currency losing value — was a much-talked about investment strategy last year and appears to be back.
Dragosch said that the reason for this is because of government intervention in the markets. When the Treasury said it would try to rein in long-term borrowing costs, the dollar’s value slid and sent investors flooding back to gold — and bitcoin.
The Treasury announced the U.S. Public debt was now at $40 trillion, a record high. The dollar’s value is also affected by excessive debt.
“Investors are no longer asking whether to hedge currency debasement with gold or bitcoin. They’re simply hedging with both,” Report added
“Bitcoin spent its first fifteen years being priced as a risk asset. If this correlation trend with gold holds, the next fifteen may look very different.”
It was a good week for the cryptocurrency market. recently trading For close to $81,438. After gaining nearly 6% in a 24 hour period.
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Source: bitcoinmagazine.com
