Bitcoin recent price rally has now shifted to a sideways meander, possibly taking cues from gold’s price drop from the record set highs.
The leading cryptocurrency is trading within the general price range of $11,600 USD to $11,900 USD for the 4th straight day.
Meanwhile, at the reporting time gold is trading near $1,988 USD – down by 4.2% from the record high of $2,075 USD reached on Friday.
Both assets have recently developed a comparatively strong direct correlation. Moreover, gold’s decline may have applied the brakes to bitcoin’s rally from lows near $9k USD. On the other hand, Gold rallied from $1,800 USD to $2,075 USD within the three weeks to 7th Aug.
While on the other hand, bitcoin rose from $9,100 USD to a peak price of $12,118 USD. As a result, the one-month correlation between the 2 assets has strengthened to a record high of 68.9%, as noted by data source Skew.
While the growing correlation validates the”store of value” narrative surrounding bitcoin, it also makes the cryptocurrency susceptible to sell-offs in gold.
“Gold is feeling the pull of gravity with United States treasury yields showing signs of life,” Singapore based QCP Capital said in its Telegram channel.
At the reporting time, the United States 10-year bond yield is trading near 0.6%, representing a 10 basis point gain from the recent low of 0.5%.
Gold, which doesn’t provide a yield, may suffer deeper pullbacks, and potentially push bitcoin lower, if bond yields still rise.
Joel Kruger, a currency strategist at LMAX Digital, believes a possible sell-off within the markets might be a bigger risk to bitcoin’s upward trajectory than pullbacks in gold.
“A turnaround in stocks could threaten bitcoin, given risk for extended stocks to reverse and the potential to ascertain what we saw back in March,” Kruger added.
Global equities could come struggling if the United States Congress remains deadlocked on additional Covid-19 outbreak.