Bitcoin’s correlation with gold has fallen to its lowest since December 2023

What’s new? Following the US presidential election, gold fell in price by 5% while bitcoin rose by more than 20%, highlighting the change in the correlation between the assets. Some analysts believe that capital is shifting from gold to bitcoin, which may be more effective as a safe haven asset.

Source: X.com

What else is known? K33 Chief Analyst Vetle Lunde noted that bitcoin’s correlation with gold hit an 11-month low after November 5. It was at 0,38 on the eve of the election but has now fallen to -0,36, its lowest since December 7 (-0,47).

As a result of the surge, bitcoin has surpassed silver in terms of capitalization, approaching the $1,8 trillion mark or $89 300 per coin. At the same time, it still lags far behind the gold market, which is valued at $17,5 trillion.

However, analysts at QCP Capital say bitcoin’s popularity as digital gold is growing, and the movement is becoming more structural as capital is reallocated from traditional safe havens such as gold to cryptocurrency.

QCP believes that even a small reallocation, just 1% of capital from gold to bitcoin, could drive the price of the digital asset to nearly $97 000.

The company also said bitcoin has entered a new phase after approaching $90 000 and has solidified its position as a treasury asset that is increasingly held by corporations, governments, and institutions.

The market is also being driven by record demand for shares of spot bitcoin exchange-traded funds (ETFs), with inflows into such products totaling $2,28 billion in just three days.

“It’s clear: the market is adjusting to BTC’s new highs, and the demand has never been hotter,” the analysts conclude.

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The breakdown in bitcoin’s correlation with gold comes amid a strengthening US dollar. After Trump’s re-election, markets are expecting economic measures that could trigger inflation, rising Treasury bond yields, and the dollar. As a result, the Federal Reserve may slow its cycle of interest rate cuts to counter inflation.

As Treasury bond yields and the dollar rise, gold becomes less attractive. This has likely contributed to the recent decline in the precious metal’s prices, as traders are likely locking in profits on short gold positions and long US dollar positions.

In addition, Trump’s policies are shaping market expectations for the December Fed meeting. Traders currently estimate the probability of a 25 basis point rate cut in December at 65%. At the end of October, the probability was 84%.