Bitcoin-Gold Correlation at All-Time High… Can We Now Trust 'Digital Gold'?

▲ Bitcoin (BTC), Gold/AI generated image ©

The correlation between Bitcoin (BTC) and gold is approaching an all-time high, once again highlighting the expectation of 'digital gold'. However, it has been pointed out that it is too early to immediately accept this as evidence of Bitcoin replacing gold as a safe-haven asset. Unlike gold, Bitcoin lacks a long-term track record of preserving asset value during financial crises and is still considered closer to a speculative investment asset.

According to the investment media The Motley Fool on September 11 (local time), the correlation between Bitcoin and gold has recently approached an all-time high as investors buy safe-haven gold amid Wall Street's risk warnings. While some view Bitcoin as an alternative to gold or a portfolio diversification tool, the media advised caution in evaluating the two assets as safe-havens of the same level.

The biggest difference lies in the nature of the assets themselves. Gold is a physical asset that has been used as a currency and a store of value for thousands of years, and it is also used in jewelry and industrial sectors. Bitcoin, on the other hand, is a digital asset whose value is determined by how much holders are willing to pay. Although it is presented as a currency and a store of value, its short history and very high price volatility differentiate it from gold.

The media analyzed that the difference between the two assets becomes even more apparent when extreme economic crises are assumed. Gold can be held physically, but Bitcoin is difficult to access if power supplies are cut off. Therefore, from the perspective of a safe-haven asset preparing for the worst-case scenario, the high correlation with gold itself is unlikely to be very significant. However, for investors who seek portfolio diversification more easily, Bitcoin's increased correlation with gold could be a positive factor.

Bitcoin's short history was also cited as a limitation. Bitcoin emerged towards the end of the global financial crisis, so it has no record of directly experiencing a severe recession triggered by the financial system itself. Indeed, the current Bitcoin price presented by the media is $77,241, down 0.98% in a day, and its 52-week trading range of $57,945.16 to $126,079.89 shows significant price volatility.

Ultimately, the media concluded that there is insufficient evidence to judge Bitcoin as a substitute for gold based solely on the rising correlation with gold. While there is room for a positive view for investors seeking diversification tools, there is no long-term record of it serving as a crisis defense in place of gold. The Motley Fool assessed that it is appropriate to view Bitcoin as a speculative investment at this stage, and it is still too early to determine its monetary and functional value.

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