In this article we explore how Cryptocurrencies in general and Ethereum in particular as a digital currency correlates with traditional currencies: the US Dollar and Gold in particular.
Ethereum to Gold Correlation
Before we look into the chart and start coming up with correlations, we want our readers to understand that it is fairly early to draw conclusions on correlations between Digital currencies and different asset classes for the simple reason that we don’t have enough data. What we are aiming for though is to provide pointers so investors can eventually spot potential correlations early on and validate later on how Ethereum is evolving in the currency and commodity ecosystem.
The following chart illustrates how Ethereum was rising along with Gold, prompting us to think that investors propelled it to the status of a safe haven. What’s interesting is also how it has held its gains relatively well compared to Gold for the same period with the exception of the sharp dip on may 27th as a sympathy reaction to Bitcoin’s drop by a $1000 in 1 single day.
The second observation is how the previous positive correlation broke after the peak in Gold on the 2nd week of June. We now see that Gold is losing ground while Ethereum is holding most gains amid the volatility and two Flash Crashes in June due to rumors and Coinbase’s GDAX crash.
ETH – Gold (ETH in Blue)
Ethereum to US Dollar Correlation
The chart below shows the price of ETHUSD relative to USDJPY (ETH Blue) over the last 3 months. We can see a clear inverse correlation very similar to the inverse correlation between the USD and Gold.
The 6 months chart shows the inverse correlation as well but also reminds us how these market reactions are to be taken with a grain of salt until validated over longer time frames.
To be taken with a grain of salt given the short time frames but it looks like Ethereum is starting to be seen as a safe haven by investors and might potentially have contributed to accelerating the recent Breakdown in the price of Gold. This is definitively a bullish sign for Ethereum because given the circumstances and how young this Cryptocurrency is, it held its gains from the month of May fairly well compared to Gold.