Bitcoin’s weakening correlation with gold challenges its ‘digital gold’ narrative as SEC delays ETF decisions and analysts debate crypto’s role in uncertain macro climate.
Bitcoin’s 90-day correlation with gold plunged to 0.15 in Q3 despite BlackRock CEO Larry Fink’s October 3 endorsement of crypto as a ‘flight to quality’ asset, as SEC delays seven spot ETF applications and gold hits eight-month lows.
Gold’s Slide Meets Crypto Regulatory Gridlock
Spot gold prices fell to $1,830/oz on October 4 – the lowest since March – as 10-year Treasury yields surged to 4.8%, reducing appeal for non-yielding assets according to Bloomberg data. Meanwhile, Bitcoin stabilized near $27,500 despite $20 million in ETF outflows last week tracked by CoinShares.
Institutional Narratives Collide With Market Realities
JPMorgan’s September 29 analysis revealed Bitcoin-gold correlation dropped sharply from 0.52 in Q2 to 0.15 in Q3, contradicting BlackRock CEO Larry Fink’s October 3 comments positioning crypto as a modern store of value. SEC simultaneously delayed decisions on seven Bitcoin ETF applications between October 2-4, including BlackRock’s own proposal.
Liquidity vs Regulation: The Macro Crosscurrents
Matrixport analysts suggest Bitcoin could reach $42,000 if gold reclaims its $2,100 resistance level, contingent on Federal Reserve policy shifts. This comes as CME FedWatch Tool shows 58% probability of rate pause in November, with potential 2024 cuts that could boost risk assets.
Historical Precedents and Diverging Paths
During 2020-2021’s pandemic recovery, Bitcoin and gold both benefited from expansive monetary policy, achieving 0.76 correlation at peak inflation concerns. However, 2023’s tighter credit conditions appear to be separating institutional adoption timelines, with gold attracting traditional safe-haven flows while crypto faces SEC scrutiny.
The ETF Approval Horizon
SEC’s latest delays push final deadlines for BlackRock, Bitwise, and VanEck’s Bitcoin ETF applications to mid-January 2024. Bloomberg Intelligence analysts give 75% odds of approval by Q2 2024, noting Grayscale’s August 29 legal victory established crucial precedent for spot product conversions.
Analytical Context: Crypto’s Evolving Macro Role
Bitcoin’s 2023 performance marks a departure from previous cycles. During 2019-2020 quantitative easing, BTC surged 582% while gold gained 40%. However, 2023’s 65% BTC rally contrasts with gold’s 6% YTD drop, suggesting decoupling from traditional inflation hedges as institutional adoption progresses.
The current divergence echoes 2017’s cryptocurrency boom, when Bitcoin’s 1,318% gains occurred alongside gold’s 12% rise. That cycle ended with 2018’s 74% BTC crash, underscoring crypto’s volatility despite growing market capitalization. Today’s $530 billion BTC market cap remains 58% below 2021’s peak, while gold maintains $11.5 trillion valuation.
