The argument has long existed — some bitcoin supporters have touted the cryptocurrency as “digital gold,” a hedge against inflation and a store of value.
But others point out that bitcoin lately has been trading in tandem with sentiment around the stock market, especially during the past few months, as investors adjust to the Federal Reserve’s plans to tighten financial conditions for the first time in nearly two years, and sooner than previously expected.
As evidence of that trend, the 100-day correlation between bitcoin
BTCUSD,
and stocks represented by the S&P 500
SPX,
reached about 0.49 on Tuesday, the highest level since July 2020, according to Dow Jones Market data.
What’s more, the 60-day correlation between bitcoin and S&P 500 reached 0.54, the highest since at least 2010, the early days of the cryptocurrency.
Correlation, which refers to the extent to which different assets are trading in relation to each other, ranges in magnitude from -1.00 to 1.00. A positive correlation means assets have been moving in the same direction, while a negative correlation means they moved in the opposite direction.
The larger the absolute value of the coefficient, the stronger the relationship. This chart shows that bitcoin maintained a positive correlation with the S&P and the Nasdaq Composite since February 2020, respectively, meaning that the assets have been moving generally in the same direction. It also shows an upward trend in bitcoin’s correlation with both the S&P 500 and the Nasdaq Composite since August 2021.
Correlation coefficient between bitcoin and the Nasdaq Composite, the S&P 500, Gold, and WSJ Dollar Index, respectively (excluding weekend changes of bitcoin)
Dow Jones Market Data, CoinDesk
Specifically, the 100-day correlation between bitcoin and tech stocks represented by the Nasdaq Composite
COMP,
reached a local high of around 0.47 on Friday, the highest level since October 2020.
The rate-sensitive Nasdaq tumbled in a rough start to the year, ending the first week three percentage points away from correction territory, before recouping significant lost ground on Monday and Tuesday.
Since early 2021, the correlation coefficient between bitcoin and the S&P 500 or the Nasdaq Composite has been much higher than between bitcoin and gold, which has been traditionally seen as a hedge against inflation. Bitcoin and gold, however, had a negative correlation during several periods.
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Read More:www.marketwatch.com
