The Declining Correlation between Bitcoin and Stock Markets
The 90-day rolling correlation between bitcoin and the Nasdaq and S&P 500 stock indices has reached its lowest level since July 2021, according to data from crypto derivatives analytics firm Block Scholes. This suggests that bitcoin’s price is no longer closely tied to sentiment in the U.S. stock markets.
Main Points:
- The correlation between bitcoin and stock markets is now near zero, the lowest in two years.
- The decline in correlation is due to both assets retracing losses sustained during last year’s tightening cycle.
- Crypto traders relying on traditional market sentiment may face disappointment due to the dwindling correlation.
- The recent filings for bitcoin exchange-traded funds (ETFs) by major companies have brought optimism to the crypto market.
- Investor interest in exchange-traded products has increased since the BlackRock announcement on June 15.
While the ETF narrative is currently driving market sentiment, analysts caution that macroeconomic factors such as fiat liquidity pressures should still be monitored. At the time of writing, bitcoin is priced at $30,830.
Hot Take:
The declining correlation between bitcoin and stock markets indicates that bitcoin is increasingly establishing itself as a separate asset class. This could attract more investors who are looking to diversify their portfolios and reduce risk. However, it also means that crypto traders should be cautious about relying solely on traditional market sentiment and should consider other factors that may influence bitcoin’s price.
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