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The relationship between bitcoin and gold has been solidifying over the past few weeks, confirming claims by bitcoin proponents that the crypto token is also a safe-haven asset. Meanwhile, its correlation with US stocks has declined significantly amid the banking crisis, especially last week.
Separation of bitcoin from stocks
Bitcoin’s correlation to gold has been on an upward trajectory in recent weeks, deviating from stock prices as the ongoing banking turmoil weighs on the stock market. Bitcoin’s relationship with stocks began to weaken with the collapse of the SVB, which triggered the current banking collapse, while the cryptocurrency’s correlation with gold strengthened a little earlier.
The upheaval in the relationship supports claims by bitcoin proponents praising the cryptocurrency for offering the same safe-haven benefits as gold bars. Their arguments have been unconvincing in recent years as bitcoin’s stock correlation hit new all-time highs.
The stock market, which was struggling last year due to record high inflation and aggressive interest rate hikes, came under even more pressure last week after SVB Bank filed for bankruptcy, the second-biggest bank failure since 2008.
Banking crisis and jump in core European CPI fuel bitcoin fresh rally
However, these events triggered a new rally for bitcoin, which broke the $27,000 threshold this week. And with this rally, the cryptocurrency’s tendency to move along with US stocks has diminished while its association with the yellow metal has intensified.
Cryptocurrency rally received additional impetus after the latest data from the consumer price index (CPI) in Europe, which showed that core inflation in the eurozone rose from 5.3% in January to 5.6% in February. The world’s number one cryptocurrency is up over 6.5% in the last 24 hours.
At the same time, gold prices are also rising. Spot gold rose 1.2% to $1945 an ounce as investors turned to safe-haven assets amid unexpected banking turmoil. While the near-term outlook for gold looks bullish, bullion could come under pressure if the Fed decides to hike interest rates aggressively next week. However, most believe that the central bank will choose another 25 basis points (bp) increase.
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