Bitcoin's correlation with gold has reached its strongest level since the 2020 pandemic, marking a significant shift in how the cryptocurrency behaves relative to other assets. Simultaneously, bitcoin's relationship with the Nasdaq has weakened considerably.
The change began following a mid-August rally triggered by the US Treasury Department's announcement to double the maximum size of liquidity-support buybacks for longer-dated government debt, from $2 billion to $4 billion per operation. During this period, bitcoin surged from below $65,000 to above $80,000, while gold climbed from $4,350 per ounce to $4,700 per ounce before facing rejection.
According to Grayscale's Head of Research, Zach Pandl, bitcoin's correlation with gold has increased from near zero at the start of the year to over 50%, while its 90-day correlation with the Nasdaq 100 has declined from over 60% to approximately 30%-33%.
Debasement Concerns Drive the Shift
Analysts attribute the growing bitcoin-gold correlation to investors treating both assets as protection against currency debasement. US federal debt has surpassed $40 trillion, persistent government deficits continue, and concerns about the long-term purchasing power of fiat currencies have renewed focus on this investment thesis. Both bitcoin and gold possess limited supply characteristics that appeal to investors seeking such protection, despite bitcoin's known volatility.
Divergence From Tech Stocks
The weakening correlation with the Nasdaq reflects a broader change in how investors value bitcoin. During the August rally, bitcoin gained over 20% while US equities struggled—a reversal from earlier periods when bitcoin frequently moved in tandem with growth stocks. This divergence suggests investors are increasingly valuing bitcoin for its scarcity and monetary properties rather than viewing it primarily as a speculative risk asset.
However, this trend shift does not indicate a complete reversal in bitcoin's relationship with equities. Recent market reactions to economic data suggest some correlation with stock markets remains.
