Is Bitcoin Digital Gold? Not Now

By Alan Zhang

Bitcoin, an asset with a fixed supply, is often compared to gold. In the past, Bitcoin’s strong performance in the face of global instability made it look like a safe haven, or “digital gold.” The Bitcoin market did well, for example, around the June 2015 Greek debt crisis, the Brexit vote in June 2016, and Donald Trump’s November 2016 election.

But as the chart below demonstrates, Bitcoin and gold don’t have much of a correlation.


We looked at Tradingview data to take the 180-day correlation analysis between Cboe's gold price and Bitfinex's Bitcoin price. For most of the time after 2017, the price shows a negative correlation, with a positive correlation only from September to November of 2018.

Over the long term, Bitcoin and gold prices are not really related. Over the past year, this has proved true as well. Even following high-risk events like the China-US trade war, investors did not appear willing to use Bitcoin as a safe haven. Instead, the price of Bitcoin plummeted.  

So, is Bitcoin digital gold? No, at least not for now. Rather than a being safe haven, Bitcoin is more like a risk asset. Just look at how it performs against the US dollar.


We looked at Tradingview data to see the 180-day correlation analysis of the US dollar index and Bitfinex's Bitcoin price. Since May 2017, The Bitcoin and US dollar indexes have a strong negative correlation. When the US dollar index fell back to 90 in January 2018, the price of Bitcoin price soared to $20,000. Since 2018, the dollar has strengthened again, from 90 to 96, while Bitcoin has fallen all the way to its current $4,000, showing clear characteristics of a risk asset.

When the US dollar is weak, liquidity is plentiful, the market has a higher appetite for risk, and thus funds tend to flow into risky assets. When the US dollar is strong and global liquidity tightens, the market’s risk appetite decreases, and funds tend to flow into low-risk assets.

And while it may appear that Bitcoin has shifted from a hedge to a risky asset, it’s more that the digital asset market has grown and its investor structure has changed. When the market value of Bitcoin in 2016 was only about $10 billion USD, most participants were non-professional investors and/or Bitcoin believers. When high-risk global events occurred, these investors would pour money into Bitcoin, pushing up the price. It may have looked like they were using Bitcoin as a hedge, but really, they were using it for speculation.

When the market value of Bitcoin grew to $100 billion, professional, institutional investors gradually entered the market, and they didn’t buy into this idea that Bitcoin’s fixed supply made it a safe haven. When liquidity got tight, their money flowed to lower risk assets, causing the price of Bitcoin to fall.

Subscribe to our weekly newsletter

We use data to help you understand the latest developments in crypto and blockchain.