Gold provides a hedge, but Bitcoin’s digital narrative attracts younger investors. Correlation metrics: Historical data shows periods of weak correlation (around 0.21), with brief spikes during market crises. Gold has notably low correlation values with Bitcoin and other cryptocurrencies, as well as traditional financial assets like the S&P 500.
Bitcoin Correlations provide a statistical measure of the relationship between Bitcoin’s price movements and those of other assets or markets. This metric is essential for understanding how Bitcoin interacts with broader financial trends, offering insights into its behavior in the context of traditional and alternative markets.
How might bitcoin behave, from a returns standpoint, relative to other asset classes? There is no certainty here, and the past is no guarantee of the future, but let’s evaluate some examples of the past for relevant lessons.
Probable correlations between bottoms and tops are evident in historical data: DXY peaks (indicating a strong dollar) often coincide with Bitcoin price bottoms, as heightened dollar strength reduces global liquidity and prompts risk off behavior among investors, leading to sell offs in volatile assets like cryptocurrencies.
This chart displays the 30 day rolling correlations between Bitcoin (BTC) and five major traditional financial assets: Gold (GLD), Small Cap Equities (IWM), Tech Stocks (QQQ), the S&P 500 Index (SPY), and Long Term U.S. Treasury Bonds (TLT). By observing correlation trends, users can evaluate Bitcoin’s relationship with different asset classes in a macroeconomic context, helping assess its ...
A correlation of 1.00 indicates perfect correlation, while lower numbers indicate that the asset classes are not correlated and generally do not move in tandem with each other—or, when the market moves down, these asset classes may not fall as much as the market in general, which could mitigate risk in your portfolio.
BTC, DXY, SPX, NDX, ALTS, AND GOLD CORRELATION It is thought that there is a correlation between the price of Bitcoin crypto and stocks and that crypto assets often follow the price action of traditional stock market.
Studies surrounding BTC’s correlation to major asset classes vary in findings, largely due to variation in depth and periodicity. In a recent study, Tsuji (2023), regressed Bitcoin’s daily returns between January 2, 2020 and November 29, 2022, discovering a linear correlation coefficient of 0.403 and an adjusted R squared of 16.1%. In contrast, Jiang et al. (2022) studied daily returns ...
This diversity of demand, zero coupon and range of uses, means the relative volatility of gold, and correlations with other asset classes is low8. In contrast, it could be argued Bitcoin’s strongest use case is still to reflect blockchain adoption, hence the stronger correlation to US Tech stocks, shown in Table 1.
As more investors seek diversification and hedging opportunities, trying to quantify the relationship between BTC and other asset classes has become increasingly common. There is a clear finding in a recent report from FTSE Russell: Since 2020, the rolling correlation of Bitcoin and Ethereum returns with risk assets has risen sharply.
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