A strong dollar and rising Treasury yields have given bitcoin and gold something in common price-wise: both assets have tumbled this year.
Though some bitcoin supporters have touted the cryptocurrency as a hedge against inflation and as “digital gold,” the two assets have been largely uncorrelated, with their correlation mostly swinging between negative 0.2 and positive 0.2 most of the time during the past year, according to data from Kaiko Research.
Or at least until recently, when their correlation recently rose above 0.36, a more than 1-year high, according to Kaiko.
A correlation of 1.0 means a pair of assets are moving in perfect lockstep, while a correlation of zero means there is no relationship between price moves.
In comparison, the correlation between bitcoin and the S&P 500 SPX,
Still, the U.S. dollar’s rally has weighed on both gold and bitcoin lately, as the precious metal is denominated in dollars, while the majority of bitcoin trades happen against the greenback. “Dollar has attracted a lot of capital seeking a safe haven,” Dessislava Aubert, analyst at Kaiko, said in an interview. Last week, the ICE U.S. Dollar Index DXY,
The uptick in Treasury yields have also hurt both assets. Some investors have been disposing of risk assets, including crypto. Meanwhile, “in the face of rising interest rates, gold’s appeal is diminished with its lack of yield,” wrote Rupert Rowling, market analyst at Kinesis Money in a Monday note.
The yield on the benchmark 10-year Treasury bond TMUBMUSD10Y,