Data showed the correlation between gold and bitcoin prices rose to its highest level since 2010.
Hard commodities -- those that need to be mined or extracted -- have become popular investments as investors fear currency devaluation and a loss of purchasing power as governments release liquidity to boost economies as they try to control the spread of the disease. In terms of storage value, gold is the best choice. Precious metals, which hit record highs during the virus's spread, are still climbing.
Bitcoin has been another hot asset over the past few months and has since rebounded from its plunge during the outbreak. The price of bitcoin has been in a state of consolidation after earlier falls, at around $10,400 a coin. Gold, which hit a record high in August, also fell into a correction. The 12-month correlation between gold and bitcoin prices is now 0.8.
In fact, in the past two months, gold and bitcoin prices have risen to record highs, with their 60-day correlation hovering at record highs above 0.5, according to Coin Metrics, meaning their price movements are becoming more and more similar.
BI analyst Mike McGlone points out that if gold then stays above $1,900 an ounce, then bitcoin can stay above the $10,000 mark.
Industry insiders said the surge in gold and bitcoin-related items was driven by the unprecedented level of economic turbulence seen this year in the currency's history, as central Banks flooded the market and investors sought safety.
Rather, though, it is the dollar that links the two. As the dollar continued to fall, the FED's AIT announcement put further pressure on the dollar. Over time, the dollar's purchasing power was bound to decline, and the need to hedge against a decline in the value of the dollar increased sharply. Scarce assets such as bitcoin and gold are in demand.
The strong correlation between bitcoin and gold suggests that some people see bitcoin as a store of value just like gold. Bitcoin is also correlated with the S&P 500 index because some people still see it as an investment that can increase their wealth.
While bitcoin and the S&P 500 were briefly out of sync during the gold boom, the overall correlation has never been higher. But charts don't tell the whole story, for example, as stock market valuations are influenced by many other factors, including economic trends and geopolitics. But in the long run, bitcoin will become increasingly popular with investors.