Ever since Bitcoin’s introduction about 16 years ago, it has been likened to gold due to certain similarities, notably its limited supply. Proponents of Bitcoin often echoed sentiments from traditional finance experts and regulators, classifying it as a commodity akin to gold. However, one might expect Bitcoin and gold to move in tandem. This was often the case in the past; however, recent events have shown a notable divergence, particularly following the dramatic crash on October 10, as indicated by the Kobeissi Letter’s latest analytics.

The Disconnect with Gold

Following the significant plunge, where Bitcoin’s price dropped from over $121,000 to $101,000 within mere hours—erasing more than $19 billion in leveraged positions—the gap in performance between Bitcoin and gold widened. Since that day, Bitcoin has plummeted to a new low of $93,000, while gold has seen gains and even achieved new record prices. According to the Kobeissi Letter, the historical correlation between the two assets has now been severed after over a year of resembling each other as safe haven investments.

“Still not convinced? Take a look at the chart of Bitcoin versus Gold since the October 10th liquidation occurred. For 12+ months, Gold and Bitcoin moved with high correlation; the safe haven assets. Since early-October, Gold has outperformed Bitcoin by 25 percentage points.”
(This quote was shared by the Kobeissi Letter on Twitter)

Analysts attribute Bitcoin’s drastic decrease and its newfound behavior contrasting with gold largely to the excessive use of leverage in crypto markets.

Rising Correlation with the US Tech Sector

Simultaneously, the Kobeissi Letter has noted a growing correlation between Bitcoin and another market: the US technology sector. The correlation coefficient measuring Bitcoin’s relationship with the Nasdaq 100 Index has surged to its highest level in over three years, hitting a score of 0.80, marking it as the second-highest in the past decade.

Over a five-year stretch, the connection has generally remained positive, aside from a brief downturn in 2023. As a result, the correlation of Bitcoin with the Nasdaq has exceeded 0.5, while its relationship with both cash and gold has hovered around zero.

“Bitcoin is increasingly behaving like a leveraged tech stock,” the Kobeissi Letter concluded.