Verification by Data: Is the Relationship Between Bitcoin and Gold Real? | How to Avoid Foolish Opinions

There are many baseless claims in the cryptocurrency market. In particular, the popular myth that “funds are shifting from gold to cryptocurrencies” is repeatedly repeated, but many of those who state this may have never actually seen the real data. This article clarifies why such market myths are incorrect through statistical verification rather than intuitive judgment. At the same time, it shows investors what to focus on to avoid being fooled by foolish opinions.

Market Myth: Why the “funds shift” claim is unfounded

While stocks and precious metals are hitting new all-time highs, cryptocurrencies are underperforming. In this environment, the repeated claim is that “funds are shifting from gold to cryptocurrencies and will soon recover.”

However, before examining this myth, an important fact must be noted. Over the past 10 years, gold itself has only clearly peaked three times (2018, 2020, 2022). In other words, the data points for verification are extremely limited.

Looking at these three peak periods, the relationship with Bitcoin is complex. In 2018 and 2022, gold’s correction occurred before Bitcoin’s decline. That is, gold should have been a “warning signal,” but Bitcoin did not follow. The only time Bitcoin became bullish after gold’s correction was during the so-called “risk-on” frenzy in 2020.

From this observation, an important conclusion emerges: the relationship between gold and Bitcoin is unstable.

Statistical verification: Why correlation coefficients alone are insufficient

At first glance, the correlation coefficient between Bitcoin and gold over the past roughly 10 years is close to 0.8. This seems quite high. But there is a trap here.

A high correlation coefficient simply means “the two assets tend to move in the same direction on a daily basis.” It does not imply a long-term structural relationship. For example, over the past decade, both Bitcoin and gold have generally been in an upward trend. That’s why the correlation coefficient is high, but this does not necessarily mean “gold’s movements dominate Bitcoin.”

If the myth that “funds are shifting from gold to Bitcoin” were true, different signals should appear statistically. That is “cointegration.”

What cointegration tests reveal: Bitcoin and gold are actually unrelated

What is cointegration? Simply put, it’s like two drunks tied together with a rope. They may stagger around, but thanks to the rope, they cannot completely drift apart. That “rope” is the cointegration relationship.

If the myth of a “funds shift” has any substance, there should be a cointegration relationship between Bitcoin and gold. In other words, when gold rises and Bitcoin lags behind, market forces should eventually pull both back onto a long-term common trajectory.

What do the results of the Engle-Granger cointegration test show? No cointegration relationship was found.

The p-value for the entire sample is 0.44, far above the common significance level of 0.05. Furthermore, examining 31 segments with a two-year rolling window also shows no cointegration at the 5% significance level.

Even the simple Bitcoin/gold ratio shows only weak stationarity (p = 0.034). Even if a weak mean-reversion exists, its half-life is about 216 days (nearly 7 months), which would be buried in noise.

In short, statistically, there is no “reversion” relationship between Bitcoin and gold.

The truth about volatility: Bitcoin is not a safe asset

The term “digital gold” is frequently used in the market, but this is fundamentally incorrect. Bitcoin’s annual volatility exceeds 50%, which is far from the characteristics of a “safe asset.”

In contrast, gold’s annual volatility is about 15%. Even 15% is somewhat high for a store of value asset, so calling an asset with over 50% volatility a safe asset is not justified.

Bitcoin operates in an independent market. It is not gold, nor merely a proxy for stock indices. Fundamentally, Bitcoin has no constituent stocks; it is essentially “code.”

The real way to identify market bottoms: what the data reveals

So, how should one identify the bottom of Bitcoin? Unfortunately, traditional methods used for assets like gold or the S&P 500 do not apply. This is because the Bitcoin market is evolving rapidly.

Unlike 10 years ago, in 2023, the increase in open interest in CME Bitcoin futures and options, along with the upcoming introduction of Bitcoin ETFs in 2024, indicates large-scale institutional participation. The market’s nature has changed.

Market bottoms are usually signaled by the following indicators:

• Continuous decline in open interest
• Funding rates turning negative
• Traders paying excessive premiums on put options
• Current volatility exceeding expected volatility
• Abnormal fluctuations in ETF capital flows

These signals indicate extreme market pessimism. In other words, the true bottom is reached when almost everyone has given up.

Summary: The importance of understanding Bitcoin as an independent market

For years, Bitcoin has been surrounded by various narratives: as a means of payment, a store of value, digital gold, a global reserve asset—each sounds appealing, but in reality, Bitcoin remains a relatively young market and has not yet achieved clear, stable utility beyond being a speculative asset.

The key is to recognize this reality. Forcing Bitcoin into traditional financial asset frameworks often results in constructing stories that favor one’s own position. Today it’s “digital gold,” tomorrow it could be “leveraged Nasdaq.”

The only way to avoid being misled by unsupported claims is to focus on statistical verification and genuine market indicators. Viewing Bitcoin as an independent entity and understanding its unique market mechanisms are essential for making accurate judgments.