Bitcoin’s (BTC) level of correlation with gold has recently hit a yearly high, according to a Tuesday blog post by crypto market data provider Kaiko. The report noted that compared to the past year, the relationship level between both assets has increased as bitcoin has become more correlated to gold.
Bitcoin and Gold Record Highest Correlation
The report mentioned that bitcoin was primarily uncorrelated to gold in the past year with both assets’ correlation levels fluctuating between negative 0.2 and positive 0.2.
Unlike last year, however, bitcoin has become more correlated to gold as the current correlation level between the two assets is slightly over positive 0.3.
On the one hand, gold greatly benefitted from the conflict between Russia and Ukraine that started earlier this year, as it recorded a significant increase in value at the time. The asset has, however, lost all the gains it gathered during that period and is currently down 10% Year-To-Date (YTD).
“Despite core inflation remaining persistently high, gold has failed to act as a safe-haven asset i.e. an asset that is expected to retain or gain in value during periods of economic downturn,” the report added.
Bitcoin, on the other hand, which recorded an all-time high (ATH) of $68,000 late last year, is presently trading at approximately $20,000, having lost more than 70% of its value.
US FED Rate Hikes Affected Both Assets
The report noted that news about the US federal reserve increasing interest rates in the country as well as the increase itself contributed to the current decline of both assets.
Recall that in January, the U.S. Federal Reserve announced plans to implement four interest rate hikes this year as part of its measures to curb inflation in the country. Following the news, bitcoin experienced a sudden drop in price. The FED has followed through with its plans as interest rates in the country have now increased.
According to the report, the strengthening of the U.S. dollar through rate hikes is having a negative impact on both bitcoin and gold, hence contributing to the increased level of mutual relationship that both assets presently share in terms of value.
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