This week, when the $ 2 trillion stimulus package was launched by US lawmakers, the performance of major market indices improved and the Dow registered. best day since 1933, an increase of 11% after a major price decline over the past few weeks.
Meanwhile, gold increased slightly more than 5%. The recent market collapse has sparked criticism about Bitcoin as Peter Schiff stated that only fools would choose Bitcoin over gold as a safe-haven.
Bitcoin, the best asset of the week
Although Bitcoin's annual profit is inferior to gold, it still outperforms the S&P 500 and WTI oil.
YTD returns for Bitcoin, Gold, S&P 500, USD and WTI oil. Source: Skew
After last week's global bloodbath, Bitcoin showed the best return of all these assets, gaining more than 10%.
At the same time, an investment in gold yielded a negative return, down about 4.4% for investors who chose precious metals instead of other safe alternatives like Bitcoin. Indices such as S&P 500 and Nasdaq continued to decline, causing investors to lose 16.2% and 13.5% respectively.
Cumulative profits for Bitcoin, Gold, S&P 500 and Nasdaq from March 16-20.
High correlation between gold and market indices
The bullish scenario for both Bitcoin and gold was suggested by the famous analyst, Willy Woo, based on the separation of safe-haven assets from stocks after the "ultimate fear" seen from last week.
In our analysis, from March 16 to March 20, gold and S&P 500 earnings correlated at 82.6% and 79.6% for Nasdaq. This does not indicate that a detached effect happened last week.
However, in the same period, the profits of gold and Bitcoin correlated at only 37.2%. In a contrasting scenario, it seems that the correlation between Bitcoin and the market index is much stronger - at 73% for the S&P 500 and 79% for the Nasdaq.
As a benchmark, the week from March 9 to March 13, showed an even stronger correlation between Bitcoin and market indices (about 79%) and the relationship was much stronger. with gold (91.6%).
Since Bitcoin's correction (February 19 to March 13), the relationship with gold is still a bit stronger than the relationship with major market indices.
Sentiment data shows that investors trust Bitcoin and gold
However, as seen from the psychological correlation provided by analyst firm The Tie, Bitcoin and gold seem to go hand in hand in March and this relationship has increased significantly since April 2019.
This shows that investors feel that both Bitcoin and gold may be the strongest options to recover their investments in the current global economic tsunami.
The psychological correlation between BTC, Gold and the S&P 500. Source: The Tie
Looking at the future prospects of Bitcoin vs. Bitcoin Gold futures, it seems that investors believe they are moving together in recent days. As the psychological correlation increased to a positive one, this highlighted a change from two weeks before the community believed that the relationship was reversed.
Bitcoin vs Psychology gold futures. Source: The Tie
In the week prior to Bitcoin's recovery, there was also an increase in the number of times gold was mentioned in Bitcoin-related headlines. This suggests that the media's and analysts' awareness of the similarities between both assets further encourages the description of Bitcoin's safe haven for investors.
Bitcoin price vs. Gold mentioned in the BTC title. Source: TIE
Gold will repeat its 2008 performance?
The volatile correlations between Bitcoin and gold each week show highlight the uncertainty of both assets in an unprecedented crisis.
However, in 2008, gold recovered from March to November, rising to a new record high less than a year later. Currently, it is difficult to determine whether gold and Bitcoin will behave in the same way that gold acted after the aftermath of the previous financial crisis. It may be easier to recognize a trend when the incidence of corona virus infection begins to decrease.
As analyst Willy Woo suggested, the profit from Bitcoin and gold this week, along with the consolidation of correlations between each asset will determine whether Bitcoin can be put on the safe haven list. is not.
All are simply public awareness of the relationship between gold and Bitcoin supporting encouraging profits from last week and also suggesting general positive behavior in the future.
Mr. Teacher
According to Cointelegraph
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