- Bitcoin has fallen behind XRP to become the second most correlated currency to gold.
- XRP improves greatly from a low 7.1% to take the position.
- Bitcoin is still striving to achieve another all-time high.
Bitcoin has been on a quest to prove itself once again since the beginning of 2020, fighting to get its price above $10,300. The digital asset appears to be aiming for another all-time high. This show of strength resonated across the crypto market, making altcoins to copy Bitcoin’s upward trend.
However, many are beginning to challenge the assumption that Bitcoin is anything like gold because the digital asset has been showing higher volatility since the year began. When compared with each other, the returns of Bitcoin and gold have no resemblance whatsoever. This, together with low correlations over the years, does very little to support the narrative.
Gold Vs the Top 10 Cryptocurrencies
Placing the returns of gold and the top 10 cryptocurrencies under a microscope reveals that in January 2020, Bitcoin was far from being similar to Gold. While this was taking place, XRP found a way to become the most correlated asset to gold. XRP has a correlation of 34.1%, while that of Bitcoin is at 21.5%. Also, Ether (ETH) and Bitcoin Cash (BCH) are not left behind, as their correlations are 20.1% and 19% respectively. Tether (USDT), on the other hand, has a wide distance separating it from gold with a correlation of -37.7%.
When a correlation is at 100% then it means the cryptocurrency is moving hand-in-hand with gold. A correlation of -100% means they have nothing in common when one is experiencing an uptrend, the other is going down. A correlation of 0% means that there exist no grounds for comparison between the cryptocurrency and gold.
Going Back In Time
A little trip down memory lane to sometime in 2019 shows that the claim of Bitcoin being related to gold holds water. Bitcoin’s correlation to gold was at 15.5% all through 2019 and it was the only digital asset among the top 10 to have such record.
Just like it was mentioned before, Bitcoin Cash also shares similarities with gold. In 2019, BCH followed after Bitcoin to be the second most correlated currency at 8.2%. Next on the line was Bitcoin SV (BSV) at 7.3%. XRP, however, had a low correlation with gold all through 2019 at 7.1%.
Who Rules? XRP or Bitcoin?
Data from a recent Coinbase report says that Bitcoin has what it takes to be the digital gold, taking into account the fundamental features of its network which has a resemblance to that of gold.
Despite all that, the triumph of Ripple since the beginning of the year cannot be ignored. The results also showed XRP to be the most correlated digital asset to gold, with Bitcoin taking second place. It is possible that down the road in 2020, Bitcoin may bounce back as the most correlated to gold just like it was in 2019, but time will decide.