Bitcoin’s Correlation With Gold Hits Record Levels
Quick Read
- The one-month Bitcoin and Gold realized correlation reaches record levels.
- Bitcoin options open interest approaches a record $2 billion ahead of the options expiry on July 31.
Amid the economic uncertainty due to the coronavirus outbreak, gold as risen significantly, printing over 25% YTD returns. The precious metal continues to hit record highs as the US dollar weakens.
Bitcoin is often dubbed as the “digital gold” as it shares a few similarities with physical gold, including a limited supply and scarcity. Moreover, the one-month Bitcoin-Gold realized correlation, according to data by Skew, is reaching record levels.
Despite gold’s performance, Bitcoin is still outperforming the popular metal year-to-date (YTD) as crypto markets saw a strong week with Bitcoin rallying past $11,000 for the first time this year.
Bitcoin Options Open Interest Surges
Bitcoin options open interest is soaring following last month’s massive Bitcoin options expiry, covered by The Crypto Associate. However, open interest has made a strong recovery reaching new highs as Bitcoin rallies.
Data from Skew, a cryptocurrency analytics firm, shows that July is also due for a massive expiry. Nearly 69,000 Bitcoin worth of options are due to expire on July 31.
Bitcoin options allow trades to have the option to buy or sell Bitcoin at a predetermined price. Traders can choose between calls and puts.
Bitcoin calls allow traders to buy Bitcoin at a predetermined price, also known as the strike price. If the price action follows and the spot price rises above the strike price, on or before the expiry date, the trader will likely exercise the option purchasing Bitcoin at the strike price, which is below the spot price.
Bitcoin puts allow traders to sell Bitcoin at the strike price. If Bitcoin price falls below the strike price, the trader can exercise the option and sell Bitcoin at the strike price, which is above the spot price.
To have this option of buying or selling Bitcoin at a predetermined price, traders pay a premium. If the price action does not follow, traders can simply decide not to exercise the option and limit their downside to just the premium they paid for the option.
Cover image by Christopher Burns on Unsplash
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