Market Overview

The Overlooked Relationship Between Gold And Bitcoin, Explained

The Overlooked Relationship Between Gold And Bitcoin, Explained
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Bitcoin bulls have long argued the cryptocurrency is a new store of value for investors thanks to its protection from inflation and its deregulated nature. In fact, even some bitcoin analysts have compared the currency to gold.

Historically, there has been no clear indication of any correlation between bitcoin and gold prices, but UBS now says a very weak correlation has started to emerge. The surprising part about analyst Chris Louney’s findings is that the correlation is actually negative.

“Toward the end of last year, we started to notice that correlation turned at least mildly negative,” Louney said on CNBC. “When we saw interest in bitcoin peak as measured by Google trends, that's really when we saw this marginal negative relationship between gold and bitcoin develop.”

Flight From Safety?

An inverse correlation suggests bitcoin prices tend to rise when gold prices fall and vice versa. So far in 2018, the most popular bitcoin fund, the Bitcoin Investment Trust (OTC: GBTC) is down 38.4 percent. The most popular gold investment fund, the SPDR Gold Trust (ETF) (NYSE: GLD), is up 1.1 percent.

Standpoint Research analyst Ronnie Moas says bitcoin is a legitimate alternative to gold and could eventually compete with the $7 trillion value of the global gold supply.

“An argument can be made that Bitcoin will be equal to Gold within 10-15 years,” Moas said in November. Standpoint has a $28,000 price target for bitcoin.

Gold Is The Dependable Choice

Other experts argue that bitcoin will never compete with gold on a large scale. The extreme volatility of the cryptocurrency market makes it too much of a risk for “flight to safety” investors. The past week, at least, suggest there’s very little safety in bitcoin at all. The SPDR S&P 500 ETF Trust (NYSE: SPY) tumbled 3.3 percent in the past week, but the price of bitcoin crashed 20.5 percent in that time.

US Gold Corp (NASDAQ: USAU) CEO Edward Karr recently told Benzinga gold has an unparalleled history of reliability for investors that cryptocurrencies can’t come close to matching.

“Over 2,500 years, that one ounce of gold gets you the same custom suit,” Karr said. “You can’t really say that yet for cryptocurrencies.”

Related Links:

12 Cryptocurrencies To Watch In 2018 (Besides Bitcoin)

Mark Yusko Explains 'The Miracle Of Bitcoin'

Latest Ratings for GBTC

Feb 2018BuckinghamInitiates Coverage OnSell
Jul 2015WedbushInitiates Coverage onOutperform

View More Analyst Ratings for GBTC
View the Latest Analyst Ratings

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