No, the bitcoin price does not correlate with the gold price: new investigation

Bitcoin is often referred to as “digital gold,” which leads many to believe that the two assets are somehow correlated. However, recent studies refute this theory.

When dealing with cryptocurrencies, the term “digital gold” quickly comes up – one of the most common names for Bitcoin. Some even believe that Bitcoin will one day become so expensive that it will replace gold as a store of value.

But while the two assets are often compared and discussed in the crypto space, recent research has confirmed that they are actually not correlated.

An incident like the recent conflict between the United States and Iran has caused gold and bitcoin prices to skyrocket as investors bought the assets for fear of an economic crash. After studying long-term data, however, the researchers are now finding that the two systems are not really related.

Bitcoin and the Iran conflict: Is $BTC becoming Digital Gold?

From @RyanWatkins_ pic.twitter.com/jN6TIlM8k9

— Messari (@MessariCrypto) January 8, 2020

To determine whether there is a correlation between BTC and gold or not, the researchers used a 90-day Spearman rank correlation calculation using data from Coin Metrics. 

The Spearman rank correlation calculation measures the price correlation by assigning three values ​​to the prices: -1, 0 and 1. If the value is 1, it indicates a perfect correlation. 0 means that there is no correlation between the assets. The value of -1 indicates a perfect inverse correlation.

What does the correlation test say Bitcoin vs. Gold out?

After studying the data, the researchers found that the correlation between BTC and gold has been between 0 and 0.2 since 2013 – and that means there is little to no correlation between the two values. 

In other words, similarities between the past performance of the two assets were at best coincidental.

However, the data shows an interesting turn around October 2019 when gold and crypto prices correlated slightly inversely. However, the numbers still show no real link between gold and digital assets – and all reports that say the opposite are based on temporary developments and coincidences.

As mentioned earlier, it is true that both gold and bitcoin prices rose sharply after the U.S. attack on Iran. However, this does not prove the correlation between the assets, but only the investors’ interest in assets other than fiat currencies.

In other words, the increase was due to an incident and not a trend. On top of that, the two assets have moved in opposite directions often enough to prove that there is no real correlation.