Is Bitcoin Really Separating From Stocks?  experts weigh

Is Bitcoin Really Separating From Stocks? experts weigh

There is an ironic joke in the truth about it Bitcoin It was sometimes closely associated with 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 basic tenets of the world’s largest cryptocurrency by market capitalization — $379 billion as of this writing, according to CoinGecko — is that it goes beyond traditional finance.

That’s why she admitted herself Bitcoin Fans, like Gemini co-founder Cameron Winklevoss, are noticing when BTC appears to have stopped following stocks and bonds.

“Bitcoin has been remarkably resilient in the past few 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 an intriguing chapter.”

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

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

Anything further than that involves comparing the current market slowdown to a time before the Federal Reserve’s Federal Open Market Committee (FOMC) implemented three consecutive rate hikes, sending borrowing rates to their highest levels 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.

Calculating the correlation yields 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.

During 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 gone down over the past few weeks, but they are still very high,” said Lucas Otomoru, director of research at IntoTheBlock. Decrypt.

Even if the correlation weakened over the past month, Otomuro said there was reason to believe it could 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 me, Decrypt It’s too early to say if bitcoin’s price movements have stopped reversing traditional markets.

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

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

“The correlation between BTC and the S&P500 (SPY) has risen to an all-time high since March 2022 as both markets have been affected by Fed action and other macro events,” Nate Madhuri, who leads research at Coin Metrics, told Decrypt in a letter.

“Historically, BTC has not been closely correlated with the stock market, so it is always possible that the tides will start to turn back towards lower correlation. But at this point, the data does not show a significant disconnect.”

disclaimer

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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