Predictive Strength
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Predictive Strength
The Rolling Correlation between Bitcoin and Gold.
The strengthened correlation aligns with rising recession fears and declining confidence in fiat currencies. As institutional investors increasingly treat Bitcoin as "digital gold," simultaneous flows into both assets during risk-off environments create a self-reinforcing pattern. This relationship has deepened since 2020, with gold now leading Bitcoin price movements by 65 days in long-term trends.
The 87% correlation peak in March 2024 coincides with Bitcoin's ETF approval and suggests growing recognition of its inflation-hedge properties. Unlike 2017-2018 when Bitcoin showed negative correlation with gold, the current positive linkage reflects institutional adoption patterns that are likely to persist through market cycles.
The Bitcoin/Gold correlation is the rolling correlation coefficient (e.g., 30-day window) between the two assets, and is calculated to measure price movement alignment, then normalized against historical averages to contextualize relative strength.
To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
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Predictive Strength
Predictive Strength
Predictive Strength