In recent years, investors have been interested in the fact that the downturn in gold stocks and Bitcoin ( $BTC ) is taking place simultaneously, and it is not a characteristic feature as gold is a safe-haven instrument and Bitcoin is commonly a risky speculative asset.
Here's why this is happening:
Increasing Real Yields and Interest Rates.
Both gold and gold miners will decline when the real interest rates (interest rates less inflation) increase since the opportunity cost of having non-yielding assets will increase.
Bitcoin, although being a digital one, is also impacted adversely by an increase in the yield as the greater the yield is, the less attractive lots of speculative investments become.
Strong U.S. Dollar
When U.S dollar is stronger, it would drag down gold prices since it will be traded in USD.
This also indirectly influences Bitcoin and several cryptocurrencies as during the times of dollar dominance, investors might be more inclined to hold dollar-based assets.
Risk-Off Sentiment
Investors can begin selling several assets simultaneously, such as gold miners and crypto, to raise cash or reduce leverage due to the uncertainty in the global market or because of tail risk-off events.
Although gold is a hedge, gold related equities are proximate to gold prices and can plummet down in volatile markets.
Correlation Correlation as a result of institutional flows.
Major institutional shareholders tend to keep the gold equities and Bitcoin in diversified portfolios.
As these investors de-risk, they can sell these two at the same time, which leads to temporary positive correlation between the two otherwise uncorrelated assets.
Short-term technical forces.
The two markets can undergo technical selling whenever major levels of support are violated.
Short-term correlations induce the similar actions of gold stocks and BTC because of the possible combination of stop-loss orders, and algorithmic trading can worsen the parallel drops.