• Bitcoin’s correlation to US equity markets recently dropped to its lowest level in more than a year and a half.
• This divergence is likely to continue as investors begin to view Bitcoin as a safe-haven alternative to fiat-based central banking systems.
• Bitcoin has seen a significant surge in price lately, as investors look for „harder“ currencies or mediums of exchange amid the recent financial crisis.
Bitcoin’s Correlation with US Stocks Hits 20-Month Low
Bitcoin’s 30-day pearson correlation between BTC and the S&P 500 just fell under 0.20, its lowest level since September 2021. This is indicative of a reversal from mid-2022 when both assets were largely moving in lockstep and their correlation briefly surpassed 0.7.
Why is the Correlation Breaking Down?
In 2021 and 2022, Bitcoin was primarily seen as a speculative asset which traded according to liquidity conditions, like tech stocks do. This explains why it experienced such a large pump during 2020/21 when the global economy was loaded with fiscal and monetary stimulus, before subsequently pulling back aggressively in 2022 due to this stimulus being pulled back on (mainly through interest rate hikes from major central banks).
The Financial Crisis & Safe Haven Status
The current financial crisis has caused investors to view Bitcoin differently than they did previously – now they’re viewing it how its creators intended them too; as an alternative ‘safe haven’ asset which can protect against inflation of fiat currencies (like USD, EUR & GBP). The cryptocurrency has rallied 40% from earlier monthly lows under $20k as people seek out ‘harder’ currencies/exchange mediums, often trading alongside gold prices.
What Does It Mean For BTC?
This shift in attitude towards Bitcoin could be good news for BTC holders who may benefit from further increases in value should the trend continue away from speculation towards safe haven status for the digital asset. Further drops of 30-day correlations under 0.08 would hit 3-year lows – indicating that what we are seeing now really could be quite significant long term change for Bitcoin’s stability and usage within mainstream finance going forward .
The breakdown of bitcoin’s correlation with US stocks indicates that investors are beginning to view it more like an alternative safe haven asset rather than simply another tech stock that moves according to liquidity conditions – potentially leading to increased value over time if this trend continues.