The year 2019 was a great one for bitcoin based on a variety of different metrics, including the one that most people are more concerned about than any other: the price, according to a report in Forbes by Kyle Torpey. Last year’s bull run has already led to many 2020 bitcoin price predictions, ranging from $20,000 to $50,000 and beyond.
However, there is one overlooked data point that sums up bitcoin’s tremendous 2019 better than any other.
Many cryptocurrency pundits have pointed out that the bitcoin price responded to the recently increased tensions between the United States and Iran in a manner similar to gold; however, despite all of the comparisons, the reality is that there isn’t much of a correlation between these two assets at all.
Having said that, bitcoin became more correlated to gold than all of the major altcoins in the second half of 2019, which indicates that the “digital gold” term may be becoming much more than just a meme.
While bitcoin has been referred to as digital gold for a number of years, 2019 was the year when this analogy really started to take hold. Bitcoin was a topic of conversation around the developing trade war between the United States and China, the use of bitcoin as an inflation hedge gained greater notoriety, and the ultimate bull case for bitcoin as a true digital gold gained steam.
Even members of the United States Congress began to describe bitcoin as an enormously valuable asset that could eventually threaten the US dollar’s global reserve currency status.
The specific reasoning behind the increased understanding of bitcoin’s role in the financial world is difficult to pin down; although, it’s possible Facebook’s Libra project led to an awakening.
According to Coin Metrics, bitcoin separated itself from the rest of the cryptocurrency market in terms of a closer correlation with gold in the second half of 2019. Bitcoin’s 180-day Spearman correlation coefficient was over 0.1 for much of December, while the coefficients for Ethereum, Bitcoin Cash, and Litecoin were all below 0.05. On a related note, the altcoin market more generally has severely struggled against bitcoin over the past couple of years.
While bitcoin still has plenty of work to do in terms of competing with gold as a global, apolitical store of value, the crypto asset took a major step forward in 2019. Bitcoin’s relative correlation to gold compared with other crypto assets should be a trend to watch throughout 2020, according to Forbes.
At the time of publication on Tuesday evening Hong Kong time, bitcoin’s price had soared to $8,676, up 7.12% in just 24 hours, according to CoinMarketCap.com.