Correlation analysis between Bitcoin price, US 10-year Treasury yield and gold price in 2015

Looking back at the price history of Bitcoin, various macro factors and Bitcoin-specific factors have influenced the volatility of Bitcoin prices. The correlation between macro factors and Bitcoin prices is strong for a period of time and weak for a period of time. For example, in 2013, the price of Bitcoin was closely related to the price of gold and showed a positive correlation. However, this year (2015), the relationship between the price of Bitcoin and the price of gold seems to have weakened, and it has instead shown a strong positive correlation with the yield of the US 10-year Treasury bond (based on the performance in the first eight months of this year).

The chart above summarizes the correlation coefficients between Bitcoin and various assets in 2015. We can see from the chart that the historical positive correlation between Bitcoin price and gold price has reversed. It is important to note that ±0.28 is a statistically significant number in correlation analysis (see notes for details), and the current correlation coefficient between Bitcoin price and gold price has become -0.58. The price chart below further shows the strong inverse relationship between Bitcoin and gold prices.

Since the beginning of 2015, we have seen many factors that have caused the price of Bitcoin to rise or fall. For example, the early Greek crisis was due to the increase in demand for alternative storage methods, which led to an upward trend in the price of Bitcoin. In recent times, people have been avoiding risks (due to concerns about the recent development of China's economy), which has also caused the price of Bitcoin to fall. In order to avoid daily abnormal factors, we analyze price correlations every five days. As we can see from the figure below, the trend of Bitcoin prices is more or less consistent with the US 10-year Treasury yield. When yields fall, usually due to macro-prudential and risk-averse considerations, Bitcoin prices also fall. Conversely, when yields rise, partly due to people's expectations of increasing Fed rate hikes, Bitcoin prices are also pushed up.

However, the correlation we analyzed above is not necessarily causal, and macro factors are not the only factors that affect the price of Bitcoin. Some specific events that occur in the Bitcoin ecosystem can also affect the price of Bitcoin, such as the flash crash of Bitfinex some time ago. In addition, the block expansion dispute has also affected the overall sentiment of the Bitcoin market. However, it is still interesting to see the direction of Treasury yields in the coming months and its relationship with the price of Bitcoin.

Note: Correlation data used in the analysis were based on Pearson product-moment correlation coefficient.