The correlation between the leading cryptocurrency and the largest financial asset, gold, has climbed to its highest level since the 2020 pandemic, while its relationship with the Nasdaq has weakened significantly.
The shift comes as concerns about debt, deficits, and currency debasement return to the spotlight after the latest developments in the US.
Closer to Gold
The change started to occur following the mid-August rally, which was propelled by the US Treasury Department’s announcement that it would at least double the maximum size of liquidity-support buybacks for longer-dated government debt, going from $2 billion to $4 billion per operation.
BTC rocketed from under $65,000 to over $80,000 within days, while the bullion went from $4,350/oz to $4,700/oz before it was rejected.
The analysts at the Kobeissi Letter argued that BTC’s increasing correlation with the precious metal accelerated following the Treasury’s move, with investors increasingly treating both as protection against currency debasement, even though gold has lost a major chunk of its gains.
Grayscale’s Head of Research, Zach Pandl, supported this narrative, noting recently that the bitcoin-gold correlation has climbed from near zero at the beginning of the year to over 50%. At the same time, the Nasdaq relationship has moved in the opposite direction.
US federal debt going past $40 trillion, persistent government deficits still existing, and concerns about the long-term purchasing power of fiat currencies have brought the so-called “debasement trade” back into focus.
Both BTC and gold have limited supply characteristics that can make them attractive under that thesis, despite the cryptocurrency’s infamous volatility.
Further Away From Nasdaq
The other part of the equation could be equally important since BTC’s 90-day correlation with the Nasdaq 100 has fallen from over 60% to around 30%-33%. This is a major change from earlier periods, when the cryptocurrency frequently behaved like a high-beta tech asset, jumping alongside growth stocks when financial conditions eased and vice versa.
The August rally was a striking example of the opposite, with BTC gaining over 20% in days, while US equities struggled. As previously reported, bitcoin had underperformed the S&P 500 on roughly two-thirds of trading days over the preceding three months before it suddenly reversed that trend.
This divergence suggests investors are increasingly valuing bitcoin for its scarcity and monetary properties rather than simply treating it as a speculative risk asset.
However, this substantial trend change does not mean that the relationship with equities has fully flipped. The Friday reaction to the strong US jobs report hinted at a higher correlation between the two as both asset classes slipped.
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