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RBC Researcher Reveals Correlation between Bitcoin and Gold

Reading Time: 2 minutes by on February 10, 2018 Bitcoin, Commentary, Finance, News

A correlation between bitcoin prices and gold may have finally been found, at least according to research by the global investment bank, RBC Capital Markets led by Chris Louney.

Plotting Trends with Nascent Technology

In an interview with CNBC, the researcher stated that the research highlights a trend between gold and bitcoin prices. Louney, a commodity analyst at RBC, said that initially, it was very difficult for him and his colleagues to plot a trend because bitcoin has been around for only a brief period as compared with gold or any other traded commodity:

“When we examine how markets look at bitcoin and gold, we saw a lot of preconceived notions driving the theories around the relationship between the two. What we did is pull together what data we had and compared that to gold.”

However, things began to change at the end of 2017 when he carefully observed his data points, and the correlation turned somewhat negative. This turn was also the time when bitcoin prices were at a record high and trading near $20,000.

The research not only included trading data points but also analyzed Google search trends for the keyword “bitcoin.” To add, Louney stated:

“When we saw interest in bitcoin peak as measured by Google trends, that’s really when we saw this marginal negative relationship between gold and bitcoin develop.”

At press time, bitcoin prices have taken a steep dive along with the stock market. Under more optimistic markets, investors tend to allocate more of their funds into equity, but when such a bull market takes a significant correction or turns bearish, investors begin looking at gold as a safer investment.

Such behavior is how gold is viewed to have an inverse price relation with stocks in a bear market.

Louney later remarked that he was surprised how gold was not performing well. Had someone told him of a major price correction in the equity markets, he would have pushed for a higher price in gold.

All of this comes as a surprise, as these market dips are happening at the same time as a correction has also occurred in the equity market. One reason why gold prices have failed to take off even in a sharp sell-off could be due to a stronger dollar and the tightening of credit policy by the Federal Reserve.

Some believe that the ongoing correction in the crypto market is more or less a result of high selling in the stock markets. Conversely, analysts have contradicting views on whether this is a major correction for bitcoin or if there exists significant selling pressure.

According to another article by Forbes, people see bitcoin as digital gold and as a safe investment.

What is of interest to technological geniuses here though, is the underlying technology that is the backbone of bitcoin and other cryptocurrencies. Blockchains have become a hotbed of innovation as government and non-government organizations across the world have started to adopt it.

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