Is Bitcoin really separate from stocks? Experts weigh

There is a twisted sense of humor in it Bitcoin Sometimes it is closely related to traditional markets.

Bitcoin traders generally prefer Bitcoin not to have a high correlation with traditional assets, such as stocks and bonds. After all, one of the founding principles of the world’s largest cryptocurrency by market capitalization — $379 billion at the time of writing, according to CoinGecko — is that it goes beyond traditional finance.

So it’s a self-promise Bitcoin Fans, like Gemini founder Cameron Winklevoss, are noticing when BTC appears to have stopped tracking stocks and bonds.

“Bitcoin has been remarkably resilient in recent weeks despite the stock market losing trillions in value,” he said chirp earlier this week. “No idea if this was the bottom but there was a strange cutout.”

It is true that bitcoin has recently outperformed stock market indices, but analysts say there is false evidence of a real decoupling.

Compared to last week, the price of Bitcoin is up 3% while the Nasdaq 100 and the S&P lose 1% each. In fact, this has been true for 90 days, according to data from blockchain analytics firm IntoTheBlock. Compared to what it was three months ago, the price of Bitcoin is up 1% while the Nasdaq 100 has lost 3% and the S&P 500 has lost 4%.

Moreover, it’s about comparing the current market downturn to a time before the Federal Reserve’s Federal Open Market Committee (FOMC) implemented three consecutive interest rate increases, pushing mortgage rates to their highest level since 2008.

Blockchain Data Platform correlation matrix It shows that Bitcoin is still closely correlated with the Nasdaq 100 and the S&P 500 – both at 0.7.

The correlation calculation gives a value between -1, which means that the two things being compared are always moving in opposite directions, or 1, which means they are always moving in the same direction.

In the first week of September, the correlation between Bitcoin and the two stock indices was much higher, at 0.9.

“Relationships with stocks have actually softened in recent weeks, but they are still very high,” said Lucas Otomoro, head of research at IntoTheBlock. Decrypt.

Although the correlation has weakened over the past month, Otomoru said there is reason to believe it may rise again, citing “risks of lower liquidity due to higher interest rates and [quantitative easing] Continue to put pressure on risky assets, including cryptocurrencies.”

A Twitter user with the pseudonym “Unusual_Whales”, who runs the options data platform of the same name, told Decrypt It’s too early to tell if Bitcoin’s price movements have stopped reversing traditional markets.

“There could be a lag effect,” they said. “It’s hard to say given that the market itself has changed a lot this week.”

The change came as the Bank of England announced on Wednesday that it had begun aggressive bond-buying to stabilize markets after the government’s economic plans drove up interest rates and pushed the British pound to unprecedented lows. Since the eighties.

“The correlation between BTC and the S&P500 (SPY) has risen to record levels since March 2022 as both markets have been affected by Fed action and other macro events,” said Nate Madre, who heads research at Coin Metrics. Decrypt in a letter.

Historically, BTC has not been highly correlated with the stock market, so it is always possible that the tide will start to turn back towards lower correlation. But at this point, the data doesn’t show any significant separation.”

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The opinions and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.

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