Is This The Best Bitcoin Price Indicator Right Now? Must-Know Details
19 October 2023 - 11:00PM
NEWSBTC
Following recent geopolitical events, the correlation between gold
and Bitcoin prices has once again come under scrutiny by market
analysts. Here’s a comprehensive dive into the relationship and its
implications. The Gold And Bitcoin Correlation After the recent
Israel-Hamas war, gold experienced a rapid uptick in its price.
This shift interestingly mirrored movements in the Bitcoin market,
emphasizing a revived correlation between the two assets. Skew, a
reputable market analyst, shared his insights on X (formerly
Twitter), noting on October 11 that “correlation has been rather
loosely applicable to BTC periods of 35 days + where there’s price
disconnection between both markets.” Related Reading: This Rare
Bullish Bitcoin Crossover Could Soon Form, Quant Predicts When
However, only days later, on October 16, he observed a potential
“re-correlation” as both Bitcoin followed the latest gold rally.
Today, the statement stands stronger with Skew’s latest tweet, “BTC
& gold correlation still there it seems. Gold may lead the next
big move for BTC.” In his recent insights shared in the Onramp
Weekly Roundup, Bitcoin analyst Dylan LeClair emphasized the
implications of the ongoing selloff in government
bonds. Rising costs for long-term financing directly influence
the global cost of capital, offering a valuation yardstick for
various assets. More significantly, the treasury market underpins
the global financial ecosystem. Its current instability could
pressure asset prices and exacerbate the pre-existing debt cycle,
potentially endangering the US’s fiscal position. This precarious
state contrasts sharply with the US administration’s fiscal
actions, as evidenced by plans like the “WHITE HOUSE EYES $100
BILLION UKRAINE, ISRAEL AND BORDER ASK”, suggesting a lack of
fiscal restraint, according to LeClair. Gold, Real Yields, And The
Changing Landscape Further complicating matters, Bill Dudley,
former president of the Federal Reserve Bank of New York, in his
recent Bloomberg piece, noted the likelihood of the current cycle
of quantitative tightening (QT) persisting until late 2025. This
prolonged QT could heighten long-term interest rates and risk
treasury market turbulence. Yet, should severe dysfunction manifest
in the treasury market, the Federal Reserve might reconsider its QT
trajectory. Interestingly, post the Russia-Ukraine conflict and the
subsequent confiscation of Russia’s G7 reserves, gold, and real
yields have shown an atypical positive correlation, challenging
their historical negative relationship. In this evolving
geopolitical landscape where even G7 sovereign debt isn’t immune to
confiscation, traditional ‘safe assets’ are being
reevaluated. This uncertainty combined with the not-so-safe
“risk free” yield from treasuries has bolstered gold’s position
(and price) as a counter-risk monetary asset and may push Bitcoin
on a similar trajectory. According to LeClair: This repositioning,
however, isn’t limited to gold alone. Bitcoin, with its unique
advantages and growing liquidity profile, is on a similar
trajectory, albeit still in the very early stages of its
monetization with a $500b market cap. The Best BTC Price Indicator?
Under these current conditions, the price of gold may be a leading
indicator for the price of Bitcoin, assuming that the correlation
between the two assets continues. This would imply that Bitcoin is
classified as a “safe haven” asset like gold by a majority of
investors, rather than a “risk asset”. Related Reading: Bitcoin
Dominance Rises: Why Altcoin Buying May Need A Break However, this
view is not shared by all. James Butterfill, the head of research
at CoinShares, pointed out that the Bitcoin market has shifted its
focus after the fake news regarding a spot Bitcoin ETF approval. He
remarked that investors now seem to prioritize the ETF approval
over macro expectations, placing less emphasis on the Federal
Reserve’s actions. Since the Coin Telegraph tweet mistake on a
Bitcoin Spot ETF approval, Bitcoin prices have decoupled from
December interest rate expectations – it seems like investors are
solely focussed on the ETF approval now, and not what the FED does.
At press time, Bitcoin traded at $28,450. Featured image from
iStock, chart from TradingView.com
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