Gold and bitcoin were touted as safe havens. Both cases are falling apart

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, +2.59% stands above 0.6, according to data from Coin Metrics, as the crypto mostly trades in tandem with other risk assets.

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, -0.49%, a gauge of the currency’s strength against a basket of major rivals, rose to the highest level since 2002.

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, 3.578% was 3.7% on Monday, after it briefly hit 4% last week, the highest level in more than a decade, according to Dow Jones Market Data.