Gold – Bitcoin Correlation Reaches Multi-Year Highs

Historically, bitcoin has been negatively correlated with all other assets, but a new correlation with gold has started to appear. It’s starting to seem like the “digital gold” moniker is apt for bitcoin as the correlation between the two continues to strengthen.

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 2020 hedge fund letters, conferences and more

Bitcoin price rises to $12,000 amid correlation with gold

In a note this week, Canaccord Genuity analyst Michael Graham said the gold - bitcoin correlation is increasing. He noted that the bitcoin price hit $12,000 after spending most of May and June in a narrow trading range below $10,000.

Crossroads Capital up 55.8% YTD after 32.5% in 2019 explains how it did it

Jeffrey Aronson Crossroads CapitalCrossroads Capital is up 55.8% net for this year through the end of October. The fund released its 2019 annual letter this month after scrapping its previous 2019 letter in March due to the changes brought about by the pandemic. For 2019, the fund was up 32.5% net. Since inception in June 2016, Crossroads Capital Read More


Then in late July, the bitcoin price made a strong move above $10,000, even spiking over 10% in only one day. Early last month, the cryptocurrency climbed above $12,000 for the second time since late 2017, although it has retreated since then.

Graham continues to compare the current phase in bitcoin trading to the cycle that lasted from 2011 to 2017. He explained that this comparison is just pattern recognition rather than fundamental analysis. However, he believes the rally in recent months has brought the bitcoin price's recovery back in line with where it would be expected to be based on the recovery followed in the previous cycle.

He noted that there have been a few periods of significant various in recent years around one-time events like the launch of Facebook's Libra and the coronavirus pandemic.

Gold price to rise back to $2,000 before year's end

Meanwhile, the gold price reached a new all-time high above $2,000. The yellow metal has since retreated but remains above $1,900 an ounce. Adrian Day of Adrian Day Asset Management told Kitco in an interview that the Federal Reserve is out of control and that it will never be able to unwind the trillions dollars it has poured into the financial markets due to the pandemic.

He believes the gold price will be back above $2,000 by the end of the year. He also said investors shouldn't worry about temporary profit taking in the yellow metal.

The movements in the gold price and bitcoin price demonstrate that the correlation between gold and bitcoin has increased. According to Graham, this correlation reached a new multi-year high in the last few months.

Bitcoin - gold correlation increases

He noted that bitcoin's third halving in May didn't result in an immediate price spike, as many had been expecting. However, it did highlight the cryptocurrency's fixed supply, which is something it shares in common with gold.

Graham added that the world's central banks continue to print money a heightened and possibly unprecedented levels. He believes this creates an argument for those who believe bitcoin can be a digital store of value to hedge against inflation and other risks.

Graham said bitcoin's correlation with gold reached new multi-year highs in August. He also reminded us of Paul Tudor Jones' recent letter in which he noted that bitcoin isn't seen as trustworthy as gold yet, but it does have equal or even better liquidity than the metal because it trades around the clock around the world. He also pointed out that it is more portable than gold and other stores of value.