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The correlation between Bitcoin and gold is rising, with Bitcoin transforming into a store of value tool.
As gold prices hit an all-time high, the correlation between Bitcoin and gold is rising sharply. According to Ki Young Ju, CEO of CryptoQuant, this phenomenon indicates that both are gaining a reputation as hedging tools against macroeconomic uncertainty.
What I am focusing on is the fact that, according to CryptoQuant's data, the current correlation coefficient between BTC and gold is over 0.85. This is a dramatic change from -0.8 in October 2021. Honestly, I am surprised by this change.
DWF Labs partner, Andrei Grachev, claims that this correlation reflects institutional investors' views on Bitcoin. He compares Bitcoin's trajectory to the history of gold and believes that Bitcoin is becoming a store of value.
Personally, I am somewhat skeptical of this “digital gold” theory. Shouldn't Bitcoin continue to exist independently from the traditional financial system?
Gold recorded an all-time high of $4,179.48 per ounce on Tuesday, with spot gold rising 0.5% to $4,128.49, and December U.S. gold futures climbing to $4,158. Silver also recorded an all-time high of $53.60 before retreating to $52.27, with an annual increase rate exceeding 85%.
The background behind financial institutions increasing their investment in hedging assets against declining purchasing power seems to be the recognition, as entrepreneur Anthony Pompliano puts it, that “no one is going to stop printing money.” This is likely pushing up the demand for hard assets.
How should we perceive this situation? Whether Bitcoin will truly become “digital gold” or take a completely different path is very intriguing for future developments.