When the pandemic crisis began in late 2019, markets around the world were affected, and a look at the data showed historic lows. Besides this, the demand for the US Dollar has increased. The U.S. Federal Reserve tried to compensate for this increase by printing trillions of dollars in new money for the U.S. government to spend, and as a result, an excessive amount of dollars was put on the market. As is known, as the money supply increases, the trend towards assets such as gold and
Bitcoin
, which have limited supply, begins.
Analysts’ view is that the ongoing pandemic in 2020, the ongoing trade disputes between the US and China, and other global ongoing events have further tightened the relationship between Bitcoin and gold. Judging by the historical data, over the past five years, the prices of Bitcoin and gold have not tended to move together. However, the rise of gold and Bitcoin with the pandemic period has brought to mind the questions of whether the correlation of Bitcoin and gold is increasing.
Bitcoin, the fact that it does not have a central control and that 21 million units will be produced, that is, it is limited, is seen as a strong factor against inflation. Gold, like bitcoin, has a limited supply and is always used as a hedge in times of crisis. As the global financial crisis continues, gold is seen by investors as a safe haven, so price increases occur, and the reason for bitcoin’s price increase is based on the same assumptions. Statistically, when we look at the correlation of returns, we see that the correlation between bitcoin and gold is very low, and since the beginning of June, the inverse relationship has increased towards non-relationship.
For the time being, it would not be correct to say that there is a correlation between the two entities. But that doesn’t refute assumptions that the correlation will increase. As a matter of fact, according to some analysts, the correlation between Bitcoin and gold is expected to increase further in the long term. As a result of this correlation increasing, the claim that Bitcoin is “digital gold” will gain strength. Bitcoin’s correlation with the precious metal, as well as the fear of a second wave, the liquidity steps taken by central banks to reduce the effects of the epidemic and the recent weakening of the dollar with the effect of the turn to gold can further strengthen the position of crypto money as a value holding tool. Bitcoin is the main reason for the increase in the developing blockchain technology,
DeFi
applications and the increase in awareness can be shown. This situation is not negative for Bitcoin pricing, on the contrary, the fact that this Bitcoin is valued more than other markets shows that the confidence in Bitcoin has increased.
