• Bitcoin’s correlation to stocks is at its lowest point since 2018, as the Nasdaq has increased 10% in the past month while Bitcoin has decreased 9%.
• This break in correlation surpasses what was seen in November 2022 amid the FTX collapse.
• The US Federal Reserve pausing its rate hiking policy likely had a part to play in the decreased correlation between Bitcoin and stocks.
Breakdown of Correlation between Bitcoin and Stocks
The US Federal Reserve this week paused its rate hiking policy after ten consecutive hikes. Over the past 30 days, the S&P 500 and Nasdaq have both surged, up 6% and 10%, respectively. Meanwhile, Bitcoin is trading below $25,000 for the first time in three months – down 9% over the same period of time.
Correlation betweenBitcoin and Nasdaq
Our Head of Research, Dan Ashmore, looked into Bitcoin’s relationship with stocks – finding that correlation between Bitcoin and the Nasdaq is at its lowest point since 2018. Ashmore found that this break in correlation surpasses what was seen in November 2022 amid the FTX collapse, when Bitcoin fell to $15,000 while stocks increased off positive inflation readings.
Reasons Behind Breakdown of Correlation
The pause on rate hikes by the US Federal Reserve likely had a part to play in this breakdown of correlation between Bitcoin and stocks. The softening forecasts around interest rates could be one factor spurring stock markets higher while crypto struggles to keep pace with other asset classes. Additionally, fears surrounding US regulation could also be keeping crypto investors away from putting money into digital assets right now.
Previous Episode of Decoupling Between Crypto & Stocks
In March 2021 our research team analysed underlying price movements to look into whether or not there was any decoupling happening between bitcoin and stock markets at that time – which came amidst a rally for bitcoin while banks were facing issues (Silicon Valley Bank fiasco). Ultimately it was determined that no decoupling had occurred then either.
It remains uncertain whether or not we will see a continued decline in correlations between bitcoin prices and stock markets going forward – however it is clear that this recent episode shows evidence of a weakened link between them compared to previous periods such as 2018 & November 2022 when correlations were much stronger than they are now.