Is Bitcoin Really Following The Gold Trend?
Recently an article was published that caught my attention, its topic was on an 'uncanny correlation' between the long-term charts of Bitcoin and Gold. With my holdings in Crypto and my interest in Gold, this sparked my interest. At first glance the monthly charts do have similarities, the price of both assets started relatively low, then both exploding in value before pulling back and stabilising within a range for a prolonged period of time. With this being said, do I think this is enough to claim an uncanny correlation between the digital currency and Gold? Probably not. The article posted a chart which does make the two appear to have taken an extremely similar path in terms of price history. The two charts, however, have been manipulated in such a way to make them appear drastically more similar than they are in reality, note the inconsistent price scale on the right axle.
Commodity analyst Christopher Louney at RBC Capitals claims to have found a slight inverse relationship between Gold and Bitcoin after studying the two markets earlier this year. The inverse correlation only started to surface during the bull run of 2017 during peak volatility and carried very little statistical significance. Louney claims this correlation has strengthened throughout 2018 but remains weak and unreliable.
There are several theories flying around the internet on the potential current or future relationship between these two assets, as it stands none of them hold any true substance nor are they supported by solid evidence. The fact of the matter is, the Cryptocurrency market is still in its infancy stages and hasn't cemented its place in the financial world just yet. This makes it near impossible to make a valid claim that the price of one affects the value of the other.
Something we cannot ignore, however, is the possibility that one-day Digital currency and Commodities will be somehow linked. It was only 150 years ago that Gold was pegged against the US Dollar with the Bretton Woods Act. Such situations in the digital world would be extremely rare as the whole philosophy of Cryptocurrency is that it is a decentralised entity so no government in the world possesses the power to do so. It will be interesting to see ten, twenty or even fifty years from now where these two assets will be. With the impending death of Fiat currency, which digital coins will step up to claim dominance if any? and how will this change the dynamics of the world we know today? It's impossible to know, we can only speculate. Will any of the current front runners in the Crypto world become a new safe haven for investors, or will they simply slot in where Fiat dropped out, creating new relationships between Gold and digital money as demand for both increases and decreases through current market climate and world events.
One thing is for certain though, our world is evolving. We are entering a brand new age, the age of digital currency and with that comes an immense opportunity for investors from all four corners of the earth to capitalise on these changes. Anyone with a WiFi connection can now invest in their future, it's no longer a secret among the elite, whether it's Commodities, Forex or Crypto's, with the right education and a focused mind you can create your perfect reality.
-Sam Moore, Gold Analyst