Aaryamann Shrivastava
FXStreet
- Bitcoin price slipped below $27,500 as Gold noted a 2.88% crash over the last ten days.
- Gold and Bitcoin correlation is currently above 50%, representing a multi-year high.
- Central banks accumulated the highest amount of Gold since 1967 in 2022 and are expected to continue in 2023, bearing a positive impact on BTC.
Bitcoin (BTC) price has been compared to Gold (XAU) for a very long time, and time and again, the cryptocurrency has delivered. Recently, BTC regained the correlation it once shared with the precious metal before its mutuality with the stock market increased, and that may not have been for the best.
Gold and Bitcoin share a boat
Gold - Bitcoin correlation is currently at a multi-year high of over 50% after it broke the correlation it shared with SPX earlier this year. The banking crisis in the United States resulted in BTC’s correlation with Gold recovering significantly.
#Bitcoin's correlation with gold surpassed its correlation with the S&P 500 pic.twitter.com/Kqp42KRcX5
— Kaiko (@KaikoData) April 3, 2023
Consequently, over the last ten days, as Gold dipped on the charts by 2.88%, Bitcoin price followed suit. The cryptocurrency in the same duration fell by 10.06% to trade at around $27,300.
XAU/USD 1-day chart
But this high correlation is set to impact the digital asset on a macro scale as Gold is expected to draw more attention this year. The concerns around the US Dollar losing its strength continue to grow, and with BRICS members - China and Russia - moving away from using USD for bilateral trades, XAU might notice more bullishness.
This is reflected in the opinion of central banks around the world. As per an annual poll of 83 central banks, about two third of the banks stated that they expect increased Gold accumulation in 2023.
According to an annual poll of 83 central banks:
— Gold Telegraph ⚡ (@GoldTelegraph_) April 23, 2023
Over two-thirds of respondents anticipate increased gold holdings among their peers in 2023.
The #gold rush is on.
Zero counterparty risk. pic.twitter.com/PLgXU20Dyl
As it is, 2022 noted the highest amount of Gold purchased at the hands of central banks since 1967, which speaks a lot to the bullishness of the investors regarding the commodity.
From the @FT article on
— Mohamed A. El-Erian (@elerianm) April 23, 2023
"Central banks load up on gold in response to rising geopolitical tensions:
Reserve managers’ purchases rose 152 per cent last year and they expect to keep buying."#markets #gold #economy #econtwitter #centralbanks #investing #investors #fintwit pic.twitter.com/YUaKTQg4G9
Most of the market considers this to be a positive environment for Bitcoin to grow and rise further. However, some find it possible for Gold to crash in the near future, which could take BTC down with itself.
Bitcoin price dependent on Gold
Bitcoin is called digital Gold due to the crypto asset being an inflation hedge investment. But its dependence on the precious metal still makes it vulnerable to a dip due to factors not necessarily particular to the crypto market.
In line with the same, investor Robert Kiyosaki stated that there is a chance Gold could crash to $1,000 based on a prediction by Steve Van Meter. These prices were last visited by XAU in October 2009, and a fall to the same level would present an almost 50% crash.
GOLD to CRASH. Steve Van Meter whom I respect predicts gold to crash to $1000. He states markets are tired of waiting for gold to go higher. If gold drops to $1000 I will buy more. I am an investor not a trader. To me, Gold, Silver, &Bitcoin are real money. To me Cash is trash.
— Robert Kiyosaki (@theRealKiyosaki) April 23, 2023
Since this is out of the realm of reality, Bitcoin price is safe from observing any drastic crash simply due to its high correlation with Gold. However, BTC might still see some pullback if Gold declines further, but recovery would bring the cryptocurrency back above $30k. The digital asset is then expected to push to $35,260, and a continued uptrend will take it to $41,273.
To understand further how these targets could be achieved, read more here - Bitcoin price action from 2019 hints what could happen to BTC in 2023
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