With Stocks in the Dumps, Bitcoin’s Correlation Hits 9-Year High


The relationship between the stock market and the Bitcoin market has been a mysterious one, especially since there has been increased interest in the digital currency side of things from more institutional players. The market offers something different for the stock market investors as it is mostly noted to be anti-correlated. 

Bitcoin has been anecdotally labelled as digital gold in recent times because of a number of reasons in the coin’s make up, but also because of situations where the asset has moved positively when the dollar has been dumped or ended when the stock markets have fallen.

The issue is there has not been a consistent correlation, or indeed anti-correlation between Bitcoin and the stock markets. However, looking closer at the data, it appears that the two markets are sticking closer to each other more and more — and this at a time when the stock market is suffering, which is not great news for Bitcoin.

A nine-year high

The founder of Quantum Economics, Mati Greenspan, sees Bitcoin and the S&P 500 more closely correlated than ever, and a lot of this has to do with the black swan event that is the coronavirus pandemic.

According to the data Greenspan, the price of Bitcoin and the S&P 500 currently has a correlation of roughly 0.6. This is the highest correlation we’ve seen since January 2011, when correlation barely exceeded 0.3. 

This correlation seems to spell bad news for Bitcoin as it follows the stock market in this dark time, and as such also pulls away from the idea of it being a hedge against the current suffering economy and global financial markets. 

However, it may not all be bad news as Greenspan adds “nothing has emerged that’s said ‘crypto is going to be our saviour.’” Bitcoin is still considered a “risk asset” and “hasn’t achieved the safe haven status that gold has taken thousands of years to build up,” he explained.

Bitcoin still finding its feet

The current pandemic that is adversely affecting the global financial markets has poised Bitcoin to really sink or swim — and it may be a little too soon for the asset which has not found its feet just yet.

Bitcoin was created out of a financial crisis in 2008 and was designed as a financial system to get away from the banks and their destructive monetary policies. Now, with these policies rising their head again, Bitcoin has 10 years experience behind it, but it is not the same thing. The coin has become an asset. 

That said, Bitcoin as a store of value still has a potential role to play as an asset to help the investor gain money in a time where interest rates are negative, and markets are a no-go area

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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