‘Digital Gold’ Label Shifts as XRP Correlation to Gold Outpaces Bitcoin

The same can be said about the association between Litecoin and “digital silver”. The critical analysis of the relationships between cryptocurrencies …

Up until the most recent correction, Bitcoin (BTC) price was repeatedly pushing above $10,300 and attempting to reach a 2020 high above $9,500. 2020 started with a strong upward trend and altcoins followed Bitcoin’s price action, as thoroughly reported in Cointelegraph.

This aggregate trend leaves the door open for a full bullish period ahead since the last Bitcoin high growth period was between April and June 2019.

The volatile behavior observed since the start of the year may be causing the traditional assumptions associated with Bitcoin and other top currencies to be challenged. One of those assumptions is the belief that Bitcoin is closely connected to gold.

Cryptocurrency market monthly overview. Source: Coin360

Cryptocurrency market monthly overview. Source: Coin360

Cryptocurrencies and the precious metals narrative

A previous analysis reported by Cointelegraph has shown that the digital gold narrative attributed to Bitcoin may not be as realistic as investors believe. The lack of a significant relationship between Bitcoin returns and gold returns as well as the low correlations across the years are contributing to the challenge to the narrative.

The same can be said about the association between Litecoin and “digital silver”. The critical analysis of the relationships between cryptocurrencies and precious metals opens the door for further research.

Correlation between top 10 cryptocurrencies and gold

By analyzing the correlations between the top 10 cryptocurrencies in the market and gold returns during January 2020, we unexpectedly found that XRP, rather than Bitcoin, has the strongest correlation to gold. XRP is correlated at 34.1%, while Bitcoin is correlated at 21.5%. Moreover, both Ether (ETH) and Bitcoin Cash (BCH) share a very similar correlation to gold as Bitcoin does with 20.1% and 19% respectively.

In the opposite direction, Tether (USDT) has an inverse correlation with gold at -37.7%. This is surprising since the behavior of a stable coin like USDT could be more correlated with a precious metal like gold than a much volatile coin like Bitcoin.

A correlation of 100% means that each cryptocurrency and gold move completely in the same direction, while -100% correlation means they are inversely related, or in simpler terms, when one goes up, the other goes down. A correlation of 0% means that each cryptocurrency and gold is not related in any way.

Correlation between Bitcoin and the top 9 currencies since Jan. 1, 2020.

Correlation between Bitcoin and the top 9 currencies since Jan. 1, 2020.

By looking at a wider time frame like 2019, the assumption that Bitcoin is more related to gold is sustained. Bitcoin is correlated at 15.5% with gold for the entirety of 2019, being the most correlated currency with gold from the top 10.

As seen before, Bitcoin Cash is the second most correlated currency with Bitcoin at 8.2%, followed by Bitcoin SV (BSV) at 7.3%. For the entirety of 2019, XRP is less correlated (7.1%) with gold than in 2020, challenging the idea that a stronger correlation can be sustained over a long-term period.

Correlation between Bitcoin and the top 9 cryptocurrencies during 2019.

Correlation between Bitcoin and the top 9 cryptocurrencies during 2019.

Outstanding cumulative returns since the start of the year

The start of 2020 witnessed the start of a strong positive trend. If an investor bought any of the top 10 cryptocurrencies between Jan. 1, 2020 and Feb. 9, 2020, they would be looking at a cumulative return of at least 134%, when Tether is excluded from the analysis. From the top 9 currencies, Bitcoin produced the least profit, shifting one’s emphasis to the possible altcoin bull run ahead.

The biggest positive trend was seen by Bitcoin SV and Bitcoin Cash with a cumulative return of 228% and 179%, respectively. Other top coins like Binance Coin (BNB), EOS, Ether, Litecoin, Tezos (XTZ) and XRP offered investors a cumulative return between 138% and 167%. Meanwhile, gold prices grew by slightly more than 4% in January.

Cumulative returns for the top 10 currencies since Jan. 1, 2020.

Cumulative returns for the top 10 currencies since Jan. 1, 2020.

Cumulative returns for gold in January 2020.

Cumulative returns for gold in January 2020.

Which is digital gold, XRP or Bitcoin?

A recent report from Coinbase suggests that Bitcoin will come closer to becoming digital gold due to underlying features of the network which are similar to the ones shared by gold as the scarcity of the asset aligns with the assumed bullish period ahead.

However, the results also show that since the start of the year, XRP has been the cryptocurrency most correlated to gold and Bitcoin follows in second place. As we move further into 2020, the relationship between gold and Bitcoin may come closer to one observed throughout 2019, when the digital asset was the most correlated coin to gold.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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DeFi Is Not Ready for Mainstream Use: Compound Founder Robert Leshner

Despite the fact that DeFi proffered plenty of use cases for Ethereum, Vitalik Buterin himself cautioned investors about the pitfalls of putting money in …

Decentralized finance (DeFi) has become a hot topic within the cryptocurrency industry in 2019. The total value of capital locked in DeFi is inching closer to $1 bln.

However, Robert Leshner, the founder of crypto lending startup Compound, told The Financial Times that this technology is now ready to hit the mainstream.

“It’s not ready for mainstream use and it’s not ready for human consumption . . . This early phase is really for researchers, professionals, very sophisticated speculators.”

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Some roadblocks for DeFi

While Lesher believes that DeFi could indeed reach widespread acceptance in the 2020s, there are experts who are less optimistic. For instance, Tim Swanson of Post Oak Labs believes that the industry will adopt a more sober attitude towards the new buzz word.

“Regulators will increasingly learn about how in many case DeFi is often basically non-compliant . . . with anti-money laundering and know your customer rules.”

Despite the fact that DeFi proffered plenty of use cases for Ethereum, Vitalik Buterin himself cautioned investors about the pitfalls of putting money in such projects, which shouldn’t be treated as a safe investment option.

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The first decentralized bank

As reported by U.Today, MakerDAO was predicted to become the first trustless bank by Weiss Crypto Ratings. More than $350 worth of the USD-based DAI stablecoin has been locked up in Maker’s protocol.

However, Bitcoin enthusiast Peter McCormack claimed that DAI is way too complicated for people to care. With Rune Christensen, the mastermind behind MakerDAO, possibly abandoning the team and becoming a neuroscientist, the project could also witness even more infighting.

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How to Create a Coinbase Account?

An important component of the crypto-world, Coinbase is the premier fiat-on-ramp and digital currency exchange. It allows people to buy …

An important component of the crypto-world, Coinbase is the premier fiat-on-ramp and digital currency exchange. It allows people to buy cryptocurrencies using FIAT or traditional money and also to cash crypto-assets back to it. Also, it features a secure exchange where users can trade crypto-assets. The service further features a wallet, where users can store cryptocurrencies and analyze data related to price/portfolio worth.

This article will guide you on how to create an account on Coinbase, since its one of the chief gateways, to the crypto-world.

Creating an Account

Coinbase user interface is designed for simplicity and ease of use. An account can be created in a few simple steps. Once you have gotten to the website, you need to open the sign up page. The next step would be to enter the complete name, email address and desired password. You will now receive a verification link on the entered email address, which you must click to proceed to the next level of account set up. Next, the system will ask you to input your mobile number to enable two factor authentication, this adds a robust layer of security, so even if your email address and password is compromised, the attacker can’t login to your account, unless the code sent to your mobile is entered. Your account on Coinbase is now created.

FIAT-On-Ramp

The most salient feature of your Coinbase account is that you can buy crypto assets using your debit/credit card and bank account. You can also convert your crypto-assets back to FIAT and withdraw to your bank or PayPal account. This service however isn’t currently available in all countries, you must check the Coinbase documentation to check the countries, where you can do that.

Cryptocurrency Exchange

Coinbase also has a digital currency exchange where you can trade crypto-assets. The exchange interface also is user friendly and similar to other prominent exchanges.

Coinbase Wallet

Coinbase features an inbuilt multi coin wallet where you can store your crypto-assets securely. It can also be used even if you don’t have a consumer account on the service. It can accessed on Web or iOS/Android version clients. However, you don’t control the private keys on the wallet and hence its advisable to withdraw it to an external wallet. But Coinbase also provides vault and multi signature wallet options, both of these options are more secure than regular wallets, because they require multiple providers to authenticate transfers. The platform also launched its own debit card which allows users to use their crypto-assets easily, like traditional debit cards, but the service rollout is currently limited.

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Disclaimer: The authors of this website may have invested in crypto currencies themselves. They are not financial advisors and only express their opinions. Anyone considering investing in crypto currencies should be well informed about these high-risk assets.

Trading with financial products, especially with CFDs involves a high level of risk and is therefore not suitable for security-conscious investors. CFDs are complex instruments and carry a high risk of losing money quickly through leverage. Be aware that most private Investors lose money, if they decide to trade CFDs. Any type of trading and speculation in financial products that can produce an unusually high return is also associated with increased risk to lose money. Note that past gains are no guarantee of positive results in the future.

Posted By

Taha Zafar

A cryptocurrency and blockchain enthusiast by heart. Taha Zafar has been active in this space since 2017, he has experience with both investing and fundamental analysis of crypto assets. He has also worked extensively with deflationary tokens.

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