Exploring Bitcoin’s [BTC] increasing correlation to gold amid banking turmoil

Bitcoin’s correlation to gold hit a multi-year high of about 50%. BTC’s relationship with equity markets weakened amidst a deepening banking crisis.

Bitcoin’s [BTC] price movement exhibited a strong resemblance to gold in the recent weeks, reinforcing the king coin’s long-supported narrative of being a safe-haven asset.

As per blockchain analytics firm Kaiko, BTC’s correlation to gold hit a multi-year high of about 50%. On the other hand, its correlation with U.S. stocks dipped considerably, exacerbated by the collapse of high-profile banking entities.

#Bitcoin's correlation with gold surpassed its correlation with the S&P 500 ???? pic.twitter.com/Kqp42KRcX5

— Kaiko (@KaikoData) April 3, 2023

‘Digital Gold’ is back!

For a long time, Bitcoin was positioned as the safe-haven asset by proponents, i.e., an asset whose value is anticipated to remain stable or increase throughout economic downturns, something on the lines of a bullion market.

However, during the bear market of 2022, BTC and Gold remained largely aloof while the correlation between U.S. entities and crypto reached all-time highs, prompting critics to challenge the ‘Digital Gold’ argument.

Source: Kaiko

But as evident, its relationship with equity markets weakened amidst a deepening banking crisis, prompting investors to dump bank stocks and explore crypto markets.

Consequently, prices rallied and BTC recorded gains of nearly 24% during March, as per CoinMarketCap. On a year-to-date (YTD) basis, the largest crypto by market cap surged 65%.

The yellow metal, too, made significant gains in the previous month. Spot Gold rose 9% since the collapse of Silicon Valley Bank (SVB) on 8 March, as safe-haven assets attracted more investors.

Source: Trading View Gold Spot/USD

Rise in BTC’s volatility

Another interesting aspect of BTC’s departure from traditional stocks has been its growing volatility. During the latter part of 2022, the coin’s volatility hit a record low and even dipped below equity indices like Nasdaq and S&P 500.

However, with the onset of the bull cycle in 2023, the price exhibited greater price swings in the vertical direction, attracting both bullish and bearish traders.

Source: Trading View; Bitcoin Historical Volatility Index

Meanwhile, bullish sentiments for BTC gathered more strength as the number of coins held on the exchanges continued to decline. Falling exchange reserves are a strong indication of reduced selling pressure and growing optimism in the market.

At the time of writing, BTC exchanged hands at $28,087.40, gaining 1.26% in 24 hours.

Source: CryptoQuant

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