Gold Steals the Limelight
ByteFolio Issue 177;
Bitcoin’s ByteTrend Score has dropped back to a 2. Things were looking promising just a week ago, and Bitcoiners are struggling to understand why.
Bitcoin Bull Market
I don’t think it’s much more complicated than gold went up. The low correlation is well known to ByteTree, and gold’s recent surge has taken the shine off Bitcoin.
Bitcoin and Gold – 20 days
Of course, there was a rate cut, which came just before the divergence. It is well known that gold thrives on low rates. In the case of Bitcoin, everyone says that’s true, but that doesn’t make it so.
Bitcoin and Gold with Fed Rates – 20 days
The entire BOLD thesis, ByteTree’s Bitcoin and Gold Index, was predicated on the idea of efficient diversification. Gold likes low rates and a weak economy, whereas Bitcoin likes them firm. Why would that be? Because Bitcoin likes a super strong economy, and low rates are associated with economic slumps.
The ByteTree Money Map
It is clear that Bitcoin and gold have a very low, and often negative, correlation. It was elevated in 2020 when the dollar slumped; otherwise, it has been negligible. The average has been 0.1, which is as good as zero.
Bitcoin and Gold Correlation - 90 Days
If Bitcoin and gold were highly correlated, BOLD would serve no purpose other than risk management (keeping the portfolio diversified). Since the correlation is low and often negative, it means that rebalancing transactions are a powerful force. Reducing the stronger asset each month and adding to the weaker wouldn’t work if they rose and fell together. But when they each do their own thing, it’s a powerful force. Since the March 2024 Bitcoin highs, BOLD has matched gold. The good news for Bitcoin is that sooner or later, Gold will get tired.
Bitcoin, Gold, and BOLD
And let’s not forget that October (Uptober in crypto speak) is just a week away, which has in the past been reliably the strongest month.
The 21Shares Bitcoin and Gold ETP (BOLD) is launching in London soon. We still do not know the date, but we will let you know the moment we do.
