One notable example occurred between April and May 2019, when Bitcoin posted a 69% gain in a month, while the S&P 500 fell by 7% that month. Bitcoin has made several sharp bullish moves in the last three years, while the S&P 500 has remained roughly flat or even declined. In fact, Bitcoin is more correlated with gold - another safe-haven asset.īut Bitcoin and the S&P 500 don't always move in lockstep. (Image: Vaneck)Īlthough we can say that Bitcoin has been generally positively correlated with the stock market in recent years, it's not a very high correlation. the two variables tend to move in opposite directions), and the closer to 1, the stronger the positive correlation (the two variables tend to move in the same direction).Ģ020 was the most correlated Bitcoin has ever been to the S&P 500: Bitcoin has become more correlated with the S&P 500 with time. The correlation coefficient is usually given as a number between -1 and 1, so the closer it is to -1, the stronger the negative correlation (i.e. This is underscored by the fact both have been on an overall uptrend over the last three years, but also that they are moving even closer in lock-step as time goes on.Īccording to data by VanEck, in the last three years, Bitcoin has gone from being positively correlated with the S&P 500 in 2018 (0.04), to negatively correlated in 2019 (-0.09), and finally back to positively correlated in 2020 (0.22). It appears there is also a slight correlation between Bitcoin bumps and broader stock market surges over the last three years. This may be explained by the increased volatility of the Bitcoin market, and the heavy use by crypto traders of stop losses or take profit orders (automated instructions to buy or sell that can cause a cascade) when the market jerks one way or the other. These crashes were the largest for the cryptocurrency market overall during the period measured - that is, Bitcoin's three largest drops of the past three years coincided with the three largest stock market drops.Ĭuriously, Bitcoin began its descent hours or sometimes days before the S&P 500 began moving each time, making it somewhat of a leading indicator for the stock market. That last dip occurred following what is now known as "Black Thursday 2020" - a historic crash that coincided with the start of widespread COVID-19 lockdowns. Overall, during the periods where the S&P 500 suffered its three largest losses, Bitcoin experienced a 31.5%, 51.6%, and 47.2% crash respectively.
What was Bitcoin doing during those stock dips? As it turns out, it was moving in a similar fashion each time, albeit with a far more severe trajectory. From peak to trough, the first was a 10% dip between January and March 2018 the second a 17.3% dip between September and December 2018 and the largest was a whopping 31.7% crash between February and March 2020. In the last three years, the S&P 500 has experienced three dips of at least 10% or more. One of the simplest ways to measure the correlation is to see how Bitcoin reacts when the stock market experiences a wild price swing one way or the other. stock exchanges - to assess the degree to which Bitcoin is correlated to the stock market. The Last Three Years: Bitcoin and stocks were correlatedĭecrypt is using the largest and most widely followed stock index, the Standard & Poor's (S&P) 500 index - which tracks the 500 largest companies by market capitalization listed on U.S.
That said, people are right to ask if Bitcoin's distinct properties as a deflationary asset mean that it will eventually break away from whatever correlation it has with traditional markets-or if people will flee from it as they do from other speculative assets in times of market turmoil.
0 kommentar(er)
