Gold and Bitcoin prices move independently. What is causing the difference?
Global central banks, particularly in China, India, and Russia, have been rapidly accumulating gold in recent times. This accumulation has raised questions about the relationship between gold and Bitcoin, two popular assets often considered hedges against weakening global currencies.
For a period of two years from November 2022 to November 2024, gold and Bitcoin exhibited a strong correlation, with both assets experiencing significant gains. Gold prices surged by 67%, while Bitcoin, known for its volatility, saw a staggering increase of nearly 400%. Analysts initially believed that this correlation would continue, given the common perception of both assets as safe havens against turbulent financial conditions.
However, in 2025, this correlation began to diverge. By late March, gold had increased by 16%, while Bitcoin had experienced a decline of over 6%. To understand this shift, it is crucial to analyze the distinct factors influencing each asset.
Bitcoin’s remarkable rise in recent years can be attributed to the increased participation of institutional investors in the cryptocurrency market. Major players such as BlackRock, VanEck, and Fidelity have significantly boosted their exposure to Bitcoin. Additionally, governments like El Salvador have adopted Bitcoin as an integral part of their financial systems. The U.S. government’s discussions about establishing a strategic crypto reserve have further legitimized Bitcoin’s status. The introduction of new financial products, such as CME Group’s Bitcoin Friday futures, has made it easier for retail investors to engage with the cryptocurrency market. These developments not only drove up demand for Bitcoin but also strengthened its position through broader institutional support.
However, Bitcoin’s recent decline can be attributed to several key factors. Firstly, the positive news that propelled Bitcoin to its peak of $109,000 was already priced into the market by mid-January. Often in financial markets, anticipation of news drives asset prices, which can lead to a sell-off once the news is confirmed. This phenomenon, known as “buy the rumor, sell the fact,” can trigger a rush to exit positions, causing asset prices to reverse.
Secondly, Bitcoin has maintained a strong correlation with the Nasdaq, a relationship that puzzles many traders. Institutional trading desks often include volatile assets like the Nasdaq and Bitcoin in the same portfolio, assuming that expertise in handling Nasdaq volatility can be applied to Bitcoin’s price movements. Therefore, a sharp decline in the Nasdaq can prompt sales of Bitcoin to cover margin requirements.
In contrast, gold’s recent surge can be attributed to multiple factors, including economic uncertainty, rising inflation expectations, and changes in central bank policies. Economic instability generally drives investors towards gold as a safe haven asset, a trend that has gained momentum recently. Moreover, the Federal Reserve’s potential shift towards looser monetary policies, rather than tightening, has further enhanced gold’s appeal. However, a significant driver of gold’s recent performance is the rapid accumulation of the metal by global central banks, particularly those in China, India, and Russia. This stockpiling has contributed to gold’s renewed strength in the market.
