Bitcoin Moves Differently From US Stock Market, Correlation Weakening?

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Data shows that while Bitcoin has been correlated with the US stock market for some time, the two have not merged recently.

Bitcoin correlation to US stocks may weaken as BTC moves differently

As noted by an analyst in a CryptoQuant afterBTC has fallen in the past week while the stock has made some gains.

A “correlation“between two assets (or markets) exists when both prices follow the same general trend over a period of time.

For Bitcoin, there has been a strong correlation with the US stock market over the past few years. The reason the markets are so tied is the rise of institutional investors in the crypto.

Such investors view BTC as a risky asset and will withdraw from the coin as soon as macro uncertainty looms over the market (which causes the price of the crypto to fall along with the stock).

Here is a chart showing the prices of Bitcoin, S&P 500 and NASDAQ over the past few years:

Correlation in the Bitcoin stock market

Looks like the assets have followed similar trends in recent times | Source: CryptoQuant

As you can see in the chart above, Bitcoin was not correlated with the stock market in 2019 and early 2020, but it all changed when COVID hit.

After the black swan crash which took place in March 2020, the price of BTC began to track the S&P 500 and NASDAQ.

Although BTC showed the same general long-term trend, the crypto remained much more volatile than the stock.

The correlation has continued during the bear market, but the last week or so has been different.

While the US stock market has seen some rise in the past 7 days, Bitcoin has made a sharp decline instead.

These markets showing different behavior lately could indicate that the correlation between them may be decreasing.

With the latest plunge, BTC has also lost the support line from the previous all-time high, something that has never happened in previous cycles.

The quant in the post notes that this recent trend is a sign of weakness in the crypto market, which could lead to a further downtrend in the near future.

BTC price

At the time of writing, Bitcoin’s price is hovering around $16.5k, down 20% from the past week. Over the past month, the crypto has lost 15% in value.

The chart below shows the trend in the coin’s price over the past five days.

Bitcoin price chart

The value of the crypto seems to have remained below $17k in recent days | Source: BTCUSD on TradingView
Featured image from André François McKenzie on Unsplash.com, charts from TradingView.com, CryptoQuant.com

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