Key Insights
- Bitcoin-gold correlation falls to 0.88, meaning they are now moving in opposite directions.
- Bitcoin has been gaining bullish momentum as liquidity bled out of gold.
- Fear and greed sentiment reflect the current dynamics between the two assets.
You’ve probably heard Bitcoin being described as digital gold. However, the market has been treating BTC (and the crypto market at large) as risk-on assets.
The crypto market crash over the last few months provided the ideal comparison between Bitcoin and gold. In fact, they have both been moving in opposite directions rather than toward equality.
As per the latest data, the Bitcoin price to gold price correlation dropped to -0.88. This was the lowest correlation between the two that has been observed since November 2023.
In other words, the two assets had an inverse relationship. This inverse correlation was evident in the first two weeks of March.
Bitcoin Price Adopted An Uptrend As Gold Price Cooled
BTC price action pulled off a 14% rally in the first half of March. This performance boosted the cryptocurrency market’s outlook, especially after an overall bearish trend since October last year.
Meanwhile, gold prices retreated by roughly 8% over the same two-week period. This means Bitcoin price benefited from liquidity rotation from gold.
Despite recent observations, both Bitcoin and gold showed a positive correlation over the last 2 days. This means the prices of both assets cooled in tandem.
Surprisingly, this may be because liquidity was flowing into gold and the greenback. Brent crude rallied to $107 at press time while the DXY reclaimed $100.
Perhaps worth noting is that the negative correlation between the two assets as observed in the two weeks was macro-driven. This had a significant impact on investor behavior as geopolitical tensions escalated.
In Gold’s case, its safe-haven characteristics drew robust liquidity inflows when the US-Iran conflict escalated. Bitcoin was on the opposite end of the risk spectrum. Consequently, investors pulled out funds and channeled them to the precious metal.
Bitcoin Fear and Greed Sentiment Jumps to 6-Month High
Bitcoin’s market sentiment jumped as high as 28 percent on Monday. It has been the highest in the last 6 weeks or so. This surge was the first major bullish outburst after the market consolidation in February.
This spike in market sentiment triggered excitement that Bitcoin might be in the early stages of recovery. However, this also risked being another trap for the bulls.
Investors get excited again, hence they FOMO in, only for short-term profit-taking to leave them holding the bag. This might be the current situation following reports that whales were being sold.
On-chain data revealed that whales moved 44,459 BTC to exchanges on 17 March. This was around the same time that BTC’s recent rally was curtailed.
The surging exchange inflows from whale addresses may signal short-term profit-taking. It also aligned with alleged reports that the situation in the Middle East was escalating once again.
The market sentiment has since dropped to 26, reflecting the current situation. This would also explain the surging oil prices and may point to another possible gold price spike.
Bitcoin price will likely remain suppressed as long as the macro picture remains bleak. This means traders will possibly continue to focus on short-term price moves.
A major Bitcoin price move to the upside is expected once the current conflicts are resolved. This will create a favorable environment for recovery as investor confidence makes a comeback.
