Bitcoin and the S&P 500 Bear Strong Correlation During Covid-19 Outbreak


The two sides of the coin — Bitcoin and the traditional markets — have been drawn ever closer under the current Covid-19 outbreak as it appears that the financial downturn and collapse affected both of the markets. The stock markets, and traditional commodities, are both suffering through a terrible turnaround, but the Bitcoin market also felt a big sting in this crisis. 

Most of the sentiment around Bitcoin’s place in the traditional market space is that — since becoming more of a store of value — it should be seen as a hedge and a potential safe haven asset when things are bad/ However, the way in which Bitcoin collapse, and its timing, correlated too well with the traditional market falls. 

This correlation with the traditional markets has now been quantified against the S&P 500 and it shows that in terms of a true correlation there is an increased one between this stock market index as well as Bitcoin’s price. This correlation has actually hit a two year high at a time where the Covid-19 crisis should be separating the two. 

Based on the outbreak

More so, the correlation between the two markets was not a fluke, it has been pointed out by cryptocurrency market research firm, Santiment, that the recent market downturn resulted in a high correlation between Bitcoin and the traditional financial markets and comes down to the virus outbreak. 

“With this pandemic, we are obviously seeing very similar movements in tandem as the coronavirus justifiably has investors in virtually every sector in a similar state of cautiousness,” the firm reported.

“The positive correlation between Bitcoin and the S&P index is now the highest it’s been since February 2018, when the world’s largest cryptocurrency abruptly ended its ATH rally by dropping all the way to $7600 in a month’s time.”

“Historically, the graph shows a repeating, almost cyclical pattern of sharp ebbs and flows between the two asset classes. In fact, plotting these correlation cycles over Bitcoin’s price action produces some very interesting results.”

The road to recovery

However, despite this data presented, Bitcoin did show some anti-correlation in regards to its price spike as the coin gathered back almost 90 percent of its losses — for a brief moment. However, this price gain did fall back somewhat, but is still far up from the bottom where it reached as low as $3,800.

It is unsure if Bitcoin will continue being correlated to the S&P 500 as the market tries to recover — if it does, it will be a much longer road to recovery for Bitcoin’s price action. But, as the coin has shown, it is a volatile asset, both up and down. 

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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