Bitcoin’s Correlation With Equities: What You Need to Know
Bitcoin’s correlation with the U.S. equities market has been on the rise for more than a month. This can be observed in the collective movement of different asset classes following events like the Japanese yen crisis and statements from the Federal Reserve. Here’s a breakdown of what you need to know about Bitcoin’s correlation with equities:
Increased Correlation Between Bitcoin and S&P 500
Recent data shows an increase in the 30-day correlation between Bitcoin and key stock market indexes like the S&P 500 and NASDAQ. This rise in correlation started on July 12, indicating a closer relationship between Bitcoin and traditional equities. However, Bitcoin has shown relative weakness compared to these indexes following the yen crisis in August. Here’s what you should know about this rising correlation:
- Bitcoin and other assets surged after Fed chair Jerome Powell’s statements at the Jackson Hole symposium on August 23.
- The recovery seen in Bitcoin and the wider market was attributed to Powell’s hint at potential adjustments to monetary policy and rate cuts.
- The S&P 500 moved close to its all-time high, showing significant recovery from previous declines, while Bitcoin saw a substantial daily surge.
Potential Room For Price Rally in Bitcoin
Despite the recent rally, Bitcoin has shown weakness compared to equities, with the S&P 500 reclaiming previous highs more easily. This disparity is common as higher-volatility assets like Bitcoin tend to move later than lower-volatility options like stocks. Here are key points regarding the potential for Bitcoin prices to rally further:
- Bitcoin’s current trading pattern aligns with past bull cycles, indicating a positive market sentiment and potential for further growth.
- The market currently lacks an oversupply of Bitcoin and altcoins, coupled with the anticipation of upcoming rate cuts, contributing to positive price movements.
- With a relatively lower number of leveraged long positions in the market, there is room for Bitcoin and altcoin prices to see additional gains.
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