The People’s Bank of China has just recorded its thirteenth consecutive month of gold acquisitions, continuing one of the most intentional reserve-management strategies in the post-crisis era.
These acquisitions indicate that the world’s second-largest economy is moving further into sovereign-controlled, seizure-resistant assets.
In this context, crypto analysts view the PBoC’s ongoing purchasing trend not as a bullish indication for Bitcoin but rather as a macro signal that supports the rationale behind the flagship digital asset.
This connection is noteworthy, particularly since China does not invest in Bitcoin, and its reserve strategy does not imply future crypto adoption.
Reasons Sovereigns are Reinforcing ‘Outside Money’ Protections
Official reports indicate that China has been increasing its declared gold reserves since late 2022, aligning with a remarkable uptick in global purchases by central banks.
While China’s stated gold holdings remain modest compared to countries like the US, the trend is more critical than the proportion. A consistent bid from one of the largest reserve managers globally influences not just bullion pricing but also reshapes the narrative surrounding reserve asset compositions.
Understanding why the crypto market perceives the PBoC’s actions as validation requires delving into the mechanics of “outside money.”
In monetary economics, “inside money” refers to someone else’s liability; for instance, a US Treasury bond exists solely as a promise from the US government. In contrast, “outside money” is an asset that does not represent someone else’s liability. It’s positive equity that settles physically, rather than through a correspondent banking system that can be interrupted.
This distinction became crucial after the US and the EU froze Russia’s central bank assets in 2022, prompting sovereigns to rethink the concept of holding “risk-free” assets within a geopolitical landscape where access can be contested.
Gold stored within a nation is difficult to impair. This fact largely explains China’s strategic pivot.
However, here’s where the analogy to crypto surfaces: Bitcoin is the only other globally traded asset that acts like digital outside money. It has no issuer, no reliance on foreign custodians, and no counterparty risk.
Therefore, the PBoC’s approach inadvertently endorses the motivations behind Bitcoin’s creation.
Institutional investors in the West recognize the nuances. They do not equate China’s gold acquisitions with an implicit endorsement of BTC.
What they observe is that the largest authoritarian economy is hedging against sovereign risk through a scarce bearer asset, which, in turn, is stimulating private-sector interest in Bitcoin as fiscal and geopolitical pressures intensify.
The Increasing Correlation Between Bitcoin and Gold
Market data suggests this is more than just a theoretical alignment or a narrative convenience.
The statistical correlation between the two assets has tightened considerably as global liquidity conditions have evolved, indicating that sophisticated investors are beginning to perceive them as distinct expressions of the same trade.
Data from analytics firm CryptoQuant shows the 180-day correlation between Bitcoin and gold reached a historic high of 0.9 in October.
Although this figure has since reduced to 0.67 as of early December, the sustained positive relationship reflects a shift from Bitcoin’s past as a purely risk-on technology asset.
Market analysts have noted that this increasing correlation reinforces the idea that both assets respond to the same macroeconomic factors, including monetary debasement and global sovereign risk.
Commenting on this correlation, CryptoQuant CEO Ki Young Ju stated:
“Gold keeps hitting new all-time highs. The Bitcoin-gold correlation remains elevated. The digital-gold narrative isn’t dead.”
For traders, Bitcoin is increasingly perceived as less of a high-risk tech asset and more as an indicator of global liquidity and national balance sheets. This suggests the asset is reacting to fiscal stress and geopolitical hedges similarly to bullion, rather than the Nasdaq.
Nonetheless, this analogy has its limitations. Gold is entrenched in central bank infrastructure and benefits from well-established custody, liquidity, and regulatory frameworks. Conversely, BTC remains volatile, politically contentious, and varies widely in regulation across different jurisdictions.
The Fiscal Mathematics
Beyond the geopolitical strategies lies the sheer arithmetic of fiscal dominance.
The impetus behind the shift toward hard assets can be linked to the United States’ deteriorating financial condition, pushing investors to rethink the safety of government bonds.
In 2024, the US reached a significant fiscal milestone, spending $881 billion on debt interest payments, with projections estimating this will rise to $970 billion in 2025 and $1 trillion in 2026.
This environment generates structural challenges for long-term bonds while simultaneously serving as a strong accelerator for scarce, non-sovereign assets like gold and Bitcoin.
Gold’s limited supply is slow and predictable by commodity standards, and new production cannot be ramped up quickly in times of high demand.
On the other hand, Bitcoin’s supply is even more limited; its issuance schedule is mathematically predetermined, and its ultimate total is capped.
This difference in supply constraints is crucial for the Bitcoin narrative: when a major economy chooses to absorb the opportunity cost of holding a non-yielding reserve asset like gold due to its value of scarcity and sovereign control, it strengthens the argument for crypto investors that scarcity itself confers a monetary advantage.
Similar Logic, Different Realities
However, the comparison is not symmetrical, and distinct risks remain.
Gold is a recognized reserve asset endorsed by longstanding legal and operational frameworks, is widely accepted among official entities, and occupies central bank balance sheets without contention. Bitcoin, by contrast, remains volatile, politically sensitive, and inconsistently regulated.
Moreover, while central banks can adjust their gold holdings utilizing established market systems, adopting Bitcoin requires conveying a novel technology to doubtful legislators.
Still, the shared macro logic of the two assets exists because they function as hedges against debasement and as diversifiers in low real yield environments.
Indeed, the surge in gold prices alongside Bitcoin’s rise to all-time highs illustrates how a non-yielding asset can outperform when investors prioritize protection over yield.
