- The correlation between Bitcoin and the stock market has weakened
- BTC Price at the time of writing – $19,358.11
- Bitcoin has recently outperformed stock market indices
The fact that Bitcoin has at times been very closely linked to traditional markets is funny in a funny way.
BTC should not have a high correlation with traditional assets like stocks and bonds, as this is preferable to Bitcoiners.
After all, one of the fundamental tenets of the world’s largest cryptocurrency, which has a market capitalization of $379 billion as of this writing, as reported by CoinGecko, is that it defies conventional finance.
Bitcoin has gained 1% while the Nasdaq 100 lost 3% in 3 months time span
Because of this, self-proclaimed Bitcoin enthusiasts, such as Cameron Winklevoss, co-founder of Gemini, pay attention when it appears that BTC is no longer following stocks and bonds.
He tweeted earlier this week that Bitcoin has been remarkably resilient the past few weeks despite the stock market losing trillions of dollars. There has been an interesting decoupling, but he has no idea if this is the bottom.
Although it is true that Bitcoin has recently outperformed stock market indices, experts contend that there is insufficient proof of a genuine decoupling.
Bitcoin has increased by 3% this week, while the Nasdaq 100 and S&P 500 have each lost 1%.According to data from the blockchain analytics company IntoTheBlock, that actually holds true for as long as 90 days.
The Nasdaq 100 has lost 3% and the S&P 500 has lost 4%, while Bitcoin has gained 1% over the past three months.
Any further than that necessitates comparing the current market downturn to a period prior to the three consecutive historically high interest rate hikes implemented by the Federal Open Market Committee (FOMC) of the Federal Reserve, pushing borrowing rates to their highest level since 2008.
Bitcoin is still pretty closely correlated with the Nasdaq 100
According to the blockchain data platform IntoTheBlock’s own correlation matrix, Bitcoin has a 0.7 correlation with both the Nasdaq 100 and the S&P 500.
A correlation has a value between -1, which indicates that the two things being compared always move in opposite directions, and 1, which indicates that they always move in the same direction. Both of these values are obtained by calculating the correlation.
The correlation between Bitcoin and the two stock indices was significantly higher, at 0.9, during the first week of September.
Outumuro stated that risks of liquidity decreasing due to interest rate hikes continue to put pressure on risk assets, including crypto and that, despite the fact that the correlation has diminished over the course of the past month, there is reason to believe that it could rise once more.
After the government’s economic plans sent interest rates skyrocketing and the British pound to lows not seen since the 1980s, the Bank of England announced on Wednesday that it had begun aggressively buying bonds to stabilize markets.