In a notable shift observed in 2023, the correlation between Bitcoin and gold has markedly increased, according to a recent report from asset management giant Fidelity. This development marks a departure from Bitcoin's historically inverse relationship with interest rates, as it rallied despite global rate increases that usually dampen demand for risk assets.
Fidelity's analysis indicates that over the past year, as real rates continued to rise (with inflation subsiding and treasury yields climbing rapidly), Bitcoin not only held steady but also rallied. This trend was mirrored in the behavior of gold, which also exhibited similar patterns recently.
In 2023, gold experienced significant fluctuations, yet it showcased strong performance against several currencies, increasing by 14.6% in U.S. dollars. The drivers behind gold's robust performance were primarily geopolitical risks and central bank demand. Bitcoin, in contrast, gained a staggering 156% during the same period.
Historically, Bitcoin and gold had little correlation over the long term, but the recent surge in correlation as both assets rallied is noteworthy. Fidelity speculates that the increased correlation could be attributed to various factors, such as the United States' growing fiscal deficit or anticipation of changes in interest rates. The speculation also includes the possibility that both Bitcoin and gold are reacting to the bond market's inaccuracies or sniffing out issues like the U.S.'s large fiscal deficits.
Moreover, Fidelity points to a tighter supply environment for Bitcoin, with the percentage of long-term holders reaching a new all-time high of 70%. Despite Bitcoin's significant rally, these long-term and illiquid coins have not moved in response to price changes to take profits, suggesting a consolidation of strong hands in the market.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.
