The correlation between Bitcoin and gold is the lowest in nearly a year. This has been the case since Donald Trump’s recent victory when gold dropped. Since Coin rose by November, the difference between these two assets shows a shift in investors’ tendencies. Investors are heading towards digital currency and are deeming safe-haven assets like gold in effect.
According to K33 Research, a research-based digital asset brokerage with investment services, the 30-day correlation between BTC and gold is now at -0.36. In correlation of assets, 1 means positive correlation, which means both assets are moving in the same direction. A value of -1, however, shows a negative correlation. That is, the two assets move in opposite directions.
Source: Chart by K33
Bitcoin Outshines Gold
In the past, Bitcoin and gold have often moved in opposite directions or at least not correlated. However, the current performance of both assets shows that Bitcoin is outperforming gold in the current world. The price of Bitcoin continues to rise, at $90,000, while gold is declining. This shift means more investors are using Bitcoin as an inflation and economic uncertainty store of value. As of press time, Bitcoin is trading at $87,697, up by 1.87% over the past day.
Source: Chart by TradingView
A significant reason for this trend is that investors hope that Trump’s second term can give more regulatory certainty to the cryptocurrency market. If BTC can continue to benefit from more apparent regulation, it could see further growth, thus becoming even more appealing to potential investors searching for higher returns. As a result of its rise, Bitcoin is now often referred to as “digital gold” – a new generation of gold used for hedging and preserving wealth.
Investors are slowly withdrawing their capital from gold and using it to invest in Bitcoin, as this market offers a much better opportunity for gain. As more institutions and Retail investors join the BTC train, it has become a safe haven for people who wish to escape high inflation rates and economic instability.
Inflation and Tariff Effects
As for the economic changes, Minneapolis Federal Reserve President Neel Kashkari also discussed the possible inflation consequences of Trump’s tariffs. On CBS’s Face the Nation, Kashkari pointed out that while one-off tariffs may not lead to higher inflation in the future, the ongoing trade war would cause uncertainty and push inflation up.
With inflation concerns rising and the US dollar appreciating, gold will come under pressure from Bitcoin. The trading community is turning its back on gold and looking for better returns in the digital currency market. These expectations have also been adjusted regarding the Federal Reserve’s actions in December. The CME Fedwatch tool now gives a 58.75% chance of a 0.25% cut in December compared to 84% at the end of October.
US Dollar Strengthens Bitcoin
Bitcoin’s price increase is also occurring at the same time as the appreciation of the US dollar. After Trump’s victory, there are increasing concerns that the new administration will introduce trade tariffs that would lead to inflation. This expectation has driven US Treasury yields higher, leading to a stronger dollar and consequently reducing demand for gold. As investors shift their focus toward assets that offer better returns in an inflationary environment.
Gold, the most preferred haven asset, has been sidelined by the digital currency known as Bitcoin. As the dollar strengthens, the fears of inflation, and the expectations that BTC would benefit from more definitive regulation under a second Trump administration, Bitcoin looks more attractive. While Bitcoin remains on the uptrend and gold struggles, it is now evident that it is becoming the new type of store of value in this new world economy.
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