?[Bitcoin buy and sell] decisions are based on what traders think someone else believes bitcoin to be worth in a specific moment, which is, in turn, based on that person's beliefs about other people's psychology…[As such, it would be] wise [for traders] to use any kind of hedge that they can find and, over the past few months, one such hedge has been, ironically, physical gold…

1. when, late last year…the bitcoin price cratered 50%, barely maintaining the $3,000 level heading into mid-December, gold rallied from $1,210 per ounce to $1,338 all the way into February.
   • If one had purchased an equivalent absolute dollar amount of each, meaning about a 5-to-1 ratio of gold to bitcoin, a $3,000 BTC loss would have been offset by about a $635 increase in gold. That's nearly a 20% return.
2. when gold topped out in late February bitcoin ran from $4,000 to about $9,000 earlier this month (It has since exploded above $11,000 to set a new yearly high) while gold, meanwhile, fell from $1,338 to $1,270.
   • In this case, a 3-to-1 ratio of gold to bitcoin ? representing the same $4,000 investment ? would have yielded a $5,000 bitcoin gain offset by a $200 gold loss.

Were one still invested…with the original $6,000 from November, the bitcoin gain would have been around $3,000 prior to the weekend rally. Gold's still up $600 or so, for $3,600 total. That's a 60% return.

Conclusion

Gold has not traditionally been inversely correlated to bitcoin (gold is usually inversely correlated to the dollar)…so the above may suggest a way for crypto investors to hedge against an ever-volatile bitcoin price in the future. It's still too early to tell, but the relation of gold prices to interest rates may also foretell a possible relationship between the Fed's interest rate policies and the leading cryptocurrency.

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