Over the last six months, I’ve been writing a daily post about the price of bitcoin. The cryptocurrency’s wild price swings have an operatic intensity and they skyrocket and crash in dramatic fashion. Here’s a chart showing its price rise in the last one year.

Volatility is always an opportunity to make money through arbitrage and price prediction. In bitcoin’s case, however, that is difficult. This is largely because it is fairly new and complex asset class. Investors are still trying to make sense of bitcoin even as its workings remain mired in complicated jargon. Even as its fundamentals are still being worked out, the cryptocurrency has begun showing correlations (howsoever faint) to other assets. This is good news for investors because it enables them to allocate funds based on risk tolerance.

Here are two things that bitcoin’s price might be correlated to.

Gold

The precious metal has been a safe haven for investors during times of crisis in monetary policies and volatility in the US dollar. The same cannot be said of bitcoin, which is being touted as a novel asset class which emerged in response to the recession. Based on conventional investment theory, managers should move funds into both assets during times of uncertainty. That didn’t happen last year. This year is proving to be a different story.

Prices for the two assets have risen and declined in sync during, at least, two instances. The first one occurred in the period between Jan 2^nd and Jan 7^th, when the price of a bitcoin and gold rose to a high and, subsequently, declined. In the second instance, prices for both assets slumped between Feb. 1^st and Feb. 6^th. According to recent reports, bitcoin might be breaking away from gold. Bitcoin gained in price last week while gold lost a bit of its luster for investors. Of course, bitcoin still has quite some catching up to do. Bitcoin’s trading volume in the last 24 hours was $5 billion. Gold has average trading volumes of $7 trillion daily.

Equities

While association with bitcoin and blockchain has helped prices for certain stocks, equities have largely remained shielded from bitcoin’s volatility. But academic research is beginning to point to slivers of correlation.

Datatrek, a research consultancy, analyzed equity prices and the price of bitcoin. According to them, the 10-day historical correlation between bitcoin and the S&P 500 reached 0.79 on Feb 6^th, as stock prices crashed due to an increase in inverse VIX funds. (A measure of 1 denotes complete correlation). But the correlation declined in the following days and was negative by Feb. 21^st.

“Bitcoin seems to track US stocks when they fall (witness earlier this month) more than when they rise. That makes sense to us. A sudden shift in risk tolerances pulls capital out of all risk assets. The same thing happened with gold during the Financial Crisis, when the yellow metal was down in 2008 along with everything else,” they wrote. Further analysis from Morgan Stanley seems to confirm the correlation. Analysis by the firm found that the correlation between bitcoin price and equity markets during the last 14 months was 0.4.

Other Cryptocurrency Prices

The cryptocurrency markets are dominated by bitcoin. At one point of time, the original cryptocurrency accounted for as much as 90% of the overall market’s valuation. But the boom in crypto markets has significantly reduced its share and it now accounts for between a third to 40% of the total valuation. As the number of investors has multiplied, they have spread their funds between an assortment of cryptocurrencies. Bloomberg analyzed the flow of funds between cryptocurrencies and found that bitcoin prices showed a high degree of correlation with other cryptocurrencies during times of slump. On the other hand, traders diversified their bets during times of upward movement in crypto markets and the correlations between bitcoin and other cryptocurrencies broke down.