Mar 13, · A report by DataTrek Research implied the correlation in bitcoin (and crypto market) and stock market becomes most eminent when sentiment, rather than core fundamentals, is the main operator of movements in the economic markets. During the stock market correction that happened at the beginning of , the correlation ran an all-time cryptoncoins.de: Vishal Chawla. Aug 25, · A report from Digital Asset Data illustrates (chart attached) that over the past three months, bitcoin has moved in tandem with gold and has swung inversely to moves in the . Sep 15, · Bitcoin is popular among investors as a hedge to inflation and tumbling stock prices due to its historically low correlation to equities markets. However, the digital asset is starting to display some uncanny correlation to stocks. BTC and the crypto space as a whole started experiencing losses since the Sep. 3 stock markets meltdown.
Correlation between stock market and bitcoinBitcoin’s Correlation To Stock Markets is On The Rise
It allows investors to safeguard their investments while also optimizing returns. This is another figure that can help investors understand the connection between the stock market and Bitcoin price. The coefficient tells how strong the connection is between two variables. Most investors opt for low correlated assets to diversify their portfolios. The test is only able to measure linear relationships and not parabolic or quadratic relationships. Analysis performed by CryptoSlate. See data on GitHub.
According to the analysis by CryptoSlate, the beta fluctuates wildly. Bitcoin had a beta of 0. This showed the stock market and Bitcoin to have a loosely correlated relation. However, saw different figures when the beta reached a high of 0.
Analysts have cited investor appetite for risk as the main reason to connect both markets. The Volatility Index VIX , which measures and moves in tandem with volatility in equity markets, is inversely correlated with bitcoin price, according to the folks at Deutsche Bank. They analyzed data from the beginning of December and found that the price of a single bitcoin increased as volatility decreased. Analysts at Morgan Stanley and Wells Fargo reiterated the investor risk theme.
At least two of the three analysts above cited institutional investors as a major factor driving correlations between equity markets and cryptocurrency markets. That makes sense when you consider that they account for a major chunk of trading in stock markets. According to a report by Tabb Group, they accounted for as much as 88 percent of overall trading volumes. That estimate includes high frequency traders. That share can only have gone up with growth of the HFT ecosystem. The entry of institutional investors into the bitcoin ecosystem will likely bring transparency, price stability and liquidity.
More importantly, it will bring a certain amount of predictability to the knee-jerk price movements that have characterized bitcoin markets. But it might be a while before that happens. Bitcoin and cryptocurrency markets are still largely opaque and dominated by individual traders. Bitcoin futures, introduced on CME and Cboe last year, have failed to draw large traders as evidenced by low trading volumes.
Tesla stock was the biggest contributor to this growth as it added 48 points to the Nasdaq index. The historically low correlation between stocks and BTC failed to play out during the sep. This rare occurrence indicates that the digital asset tends to get liquidated by investors during vulnerable periods of the global economy. In this way, BTC remains similar to tech stocks and other risk-on assets. Looking ahead, there is a macro factor that could cause legacy markets to shoot up , according to Alex Kruger, a macro crypto analyst, and economist.
A rebounding stock market is bullish for BTC, given the correlation seen between the two asset classes. That said, institutional investors still have faith in BTC as a hedge against inflation despite mirroring stock movements in recent weeks. Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, I cover trendy issues on digital currencies. We are dedicated to providing unique and informative daily content across all facets of the blockchain and cryptocurrency industry whether it be news, opinion pieces, technical analysis, reviews, interviews, podcasts and more.
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