Amazing data: Bitcoin and gold have no relationship at all!

Source: The Decentralized Finance Report

Original Title: Does Bitcoin Follow Gold?

Compiled and organized by: BitpushNews

Year to date (YTD), gold has risen by 39%, while Bitcoin has only risen by 19%. The last time gold outperformed Bitcoin in a bull market was in 2020. In the first half of that year, gold rose by 17%, while Bitcoin rose by 27%.

So what about the second half of 2020? Bitcoin soared by 214%, while gold only increased by 7%.

This inevitably raises the question: Are we today in a similar phase, with Bitcoin about to experience an astonishing outperformance?

This report will deeply analyze the relationship between Bitcoin and gold, revealing everything you need to know.

Disclaimer: The views in this article are the author's personal opinions and should not be considered as investment advice.

Let's get started.

####Correlation Analysis

#####What drives the price of gold?

Gold and 10-Year Real Interest Rate Data Source: The Decentralized Finance Report

The above figure tells us that there is a negative correlation between gold prices and real interest rates (based on monthly return changes and changes in 10-year real interest rates).

In simple terms:

• When real interest rates decline (the nominal yield minus the inflation rate shrinks), gold tends to perform well.
• When real interest rates rise (yields increase relative to inflation), gold often struggles (because gold itself does not generate yield).

Nevertheless, this relationship has recently decoupled, with gold rising alongside real interest rates—this move may have been triggered after the United States kicked Russia out of the SWIFT system in February 2022.

Currently, the R² value is 0.156, which means that during this period, 15.6% of the gold price movement can be statistically explained by changes in the real interest rate.

Importance:

We are entering a period where real interest rates may decline – historically, this has been a favorable setup for gold. For investors, this indicates that as inflation expectations stabilize above 2% and nominal yields decline, the upward momentum for gold may continue.

Gold and US Dollar Index Data Source: The Decentralized Finance Report, FRED

Similar to the relationship with actual interest rates, gold has historically maintained a negative correlation with the U.S. dollar index.

• When the US dollar falls, gold often rises (current situation).
• When the US dollar strengthens, gold usually comes under pressure.

The R² value is 0.106, indicating that approximately 10.6% of the fluctuations in gold prices during this period can be statistically explained by the fluctuations in the US dollar.

#####Bitcoin and 10-Year Real Interest Rate

Data source: The Decentralized Finance Report, FRED

Unlike gold, there is no significant relationship between Bitcoin and the 10-year real interest rate.

Sometimes, Bitcoin rises with the decline in real interest rates. At other times, the situation is exactly the opposite. This inconsistency suggests that Bitcoin's price movements are not driven by the same macroeconomic factors that affect gold.

The R² value of 0.002 confirms this point - the actual interest rates hardly explain the returns of Bitcoin.

#####Bitcoin and US Dollar Index

Data source: The Decentralized Finance Report, FRED

There is no consistent relationship between the price movements of Bitcoin and the US dollar index.

Sometimes, Bitcoin has a negative correlation with the US dollar (rising when the dollar weakens), while at other times, it rises together with the dollar. This inconsistency highlights that Bitcoin is not driven by the same monetary dynamics that affect gold.

The R² value of 0.011 reinforces the point that the US dollar can only explain 1% of Bitcoin's returns.

Importance:

Unlike gold (which is usually measured from the perspective of the strength of the dollar), the driving factors for Bitcoin are different: adoption cycles, liquidity flows, on-chain reflexivity, and other special factors/narratives.

Its lack of correlation with the US dollar further confirms that Bitcoin is becoming a unique asset class, rather than just a "digital version of gold."

#####Bitcoin and Nasdaq Index

Data Source: The Decentralized Finance Report

Compared to macro drivers (such as real interest rates or the dollar), Bitcoin shows a stronger positive correlation with the Nasdaq index.

Since 2017, this relationship has remained consistent, with an R² of 0.089, meaning that approximately 8.9% of the Bitcoin price movement can be statistically explained by the fluctuations of the Nasdaq index.

In comparison, the R² of gold and the Nasdaq index during the same period is only 0.006—less than 1% of gold's returns are related to the performance of tech stocks.

#####The correlation between Bitcoin and gold

2017 Cycle Data Source: The Decentralized Finance Report

During the bull market cycle in 2017, Bitcoin showed a weak correlation with gold.

The R² during this period was only 0.033, meaning that from 2017 to 2018, gold could explain only about 3.3% of the price movement of Bitcoin.

2021 cycle

Data Source: The Decentralized Finance Report

Based on a 30-day rolling correlation, Bitcoin and gold show a slightly stronger relationship, especially in 2020, when both assets rose together.

2025 cycle

Data Source: The Decentralized Finance Report

In this cycle, the correlation between the two has weakened.

The R² during this period is 0.015 - which means that gold can only explain 1.5% of the Bitcoin price movements in this round of cycles.

####Beta Coefficient Analysis

####As mentioned above, the correlation between Bitcoin and gold is very weak.

What about the beta coefficient? Is Bitcoin like a "leveraged bet on gold"?

Data Source: The Decentralized Finance Report (Monthly)

The answer is complex. It indeed played such a role in 2017, 2019, 2020, and 2023.

However, in 2015 (a year of Bitcoin decline), 2018 (another year of decline), and 2021 (a year of significant Bitcoin rise), the price movements of Bitcoin were completely opposite to the direction of gold.

####Bitcoin vs Gold Returns

The "gold bugs" are ecstatic, as the performance of this asset has outpaced Bitcoin this year (39% vs 19%). Since January 1, 2023, gold has risen by 102%, and the gold mining sector has performed even better (VanEck's Junior Gold Miner ETF, GDXJ, has risen 122% year to date).

We even see some cryptocurrency investors starting to add gold to their portfolios.

However, if you own Bitcoin, do you really still need to allocate gold in your portfolio?

This part of the report aims to answer this question.

Data Source: The Decentralized Finance Report

Data source: The Decentralized Finance Report

Compared to gold, Bitcoin has historically had a superior return rate (and volatility).

However, how does it compare to the return rate of gold when we adjust for risk?

####risk-adjusted return

• Sharpe Ratio: Measures the return earned for each unit of risk (measured by volatility, including both upward and downward movements).
• Sortino Ratio: Measures the return per unit of downside risk. Unlike the Sharpe Ratio, it only takes into account the "bad" volatility (i.e., the volatility of declines).

Data Source: The Decentralized Finance Report

We can see that Bitcoin often produces excellent risk-adjusted returns in bull market years (2017, 2020, 2023). However, in bear market years (2014, 2018, 2022), due to its high volatility, its Sharpe ratio also falls into negative values.

That said, the Sharpe ratio is not the best metric for measuring Bitcoin, as it penalizes all volatility (including upward volatility).

This is why we prefer to use the Sortino ratio to measure Bitcoin (which only penalizes downside volatility).

We can see that Bitcoin has produced an excellent Sortino ratio, indicating that its volatility is a feature rather than a flaw.

A Sortino ratio above 2.0 is considered excellent.

####Impact of 5% Configuration

Data source: The Decentralized Finance Report

Total return rate since January 1, 2018 (5% allocation):

• 100% S&P 500 Index: 149%
• 95% S&P 500 + 5% Gold: 152%
• 95% S&P 500 + 5% Bitcoin: 199%

If the allocation of Bitcoin and gold is 10%:

Total return since January 1, 2018 (10% allocation):

• 100% S&P 500 Index: 149%
• 90% S&P 500 + 10% Gold: 155%
• 90% S&P 500 + 10% Bitcoin: 253%

If you are primarily a cryptocurrency investor, should you own gold?

In our view, if you seek excess returns and can tolerate some volatility, then Bitcoin is the superior asset. If your main goal is to preserve value, then gold certainly has its place.

In many ways, we believe that the advantages of these two assets are generationally specific. Millennials and Generation Z tend to prefer Bitcoin due to its asymmetric upside potential. Baby Boomers may prefer gold because it serves as an inflation hedge (with less upside potential but a proven record of preserving value).

We used to hold gold, but for the following reasons, we have transferred our "hard currency" allocation 100% to Bitcoin:

• Asymmetric upside potential: Compared to gold, Bitcoin's global penetration rate is very low.
• Superior Scarcity: A hard cap of 21 million coins, with supply responding inflexibly to demand.
• Portability: Bitcoin is a hard currency asset that also features a global payment network and accounting system.
• Divisibility: Gold is not easily divisible or fractionable.
• Transparency and Verifiability: The circulating supply of gold is unknown, and verifying its purity and ownership requires third-party trust.
• Liquidity and 24/7/365 market access.
• Demographics: Bitcoin is global and has stronger brand equity among the younger generation.
• Financialization: Bitcoin is increasingly being integrated into the global financial system.

####Conclusion

During the 21-year cycle, it feels like "gold has led bitcoin." However, it is difficult to find conclusive evidence that there is a lasting correlation between these two assets.

Bitcoin is often referred to as "digital gold" due to its characteristics as a "hard currency."

However, its trading method is almost entirely dissimilar to that of gold—gold serves as an inflation hedge due to its negative correlation with the US dollar and real interest rates.

Conversely, Bitcoin is rising as an independent asset class—driven by technological adoption, financialization, global liquidity, reflexivity, and adoption cycles.