Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Gold surged to a new all-time high on Monday, breaking a recent correlation with Bitcoin, which simultaneously dropped to a two-month low. This divergent movement occurred after President Donald Trump’s comments on inflation and has been attributed by analysts to Bitcoin’s “split personality” as both a potential safe haven and a risk asset.
Gold’s Record Rally
The price of gold climbed to an unprecedented $3,485 per ounce, marking a 1% spike on Monday. This surge followed a Sunday post by President Donald Trump on his social media platform, Truth Social, where he asserted, “prices are ‘WAY DOWN’ in the USA, with virtually no inflation.”
Bitcoin’s Divergent Dip
Concurrently, Bitcoin experienced a significant downturn, falling to $107,290 on Coinbase. This marked its lowest level since early July and represented a correction exceeding 13% from its mid-August all-time high.
Correlation Breakdown and “Split Personality”
IG market analyst Tony Sycamore highlighted a recent breakdown in the strong correlation that had previously existed between gold, Bitcoin, and the Nasdaq over the past two and a half years. According to Sycamore, this divergence is not uncommon for brief periods and stems from Bitcoin’s “split personality.”
Sycamore elaborated that Bitcoin is sometimes perceived as a store of value or a safe haven, while at other times it is viewed as a risk asset. This dual nature can lead to its price movements diverging from traditional safe-haven assets like gold.
Analyst Perspectives
Vince Yang, co-founder of Ethereum layer-2 platform zkLink, echoed this sentiment, stating that the correlation between Bitcoin and gold has been “pretty low, even negative at times this year.” Yang explained that gold remains the classic “safe-haven” play, whereas Bitcoin is more closely tied to liquidity and market risk, suggesting they often “balance each other out rather than run side by side.”
Potential for Re-alignment
Despite the current divergence, Sycamore anticipates that the correlation between Bitcoin and gold could eventually reassert itself. He suggested this might occur if Trump’s economic policies lead to a “red hot” economy and the Federal Reserve cuts interest rates amidst persistent inflation, causing both assets to appreciate.
Historically, data indicates that Bitcoin’s price tends to rally within 150 days of gold hitting new all-time highs. This pattern suggests a potential long-term re-establishment of their correlation, though from what price level Bitcoin will find its footing remains to be seen.
The recent market movements underscore the evolving perceptions of Bitcoin, distinguishing it from traditional safe-haven assets like gold, at least in the short term. While analysts point to its dual nature as both a risk and a store-of-value asset, the long-term relationship between the two assets remains a subject of ongoing observation, with historical patterns suggesting a potential re-alignment.
