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of bitcoin Correlation with US equity markets fell to its lowest level in more than a year and a half. This is according to crypto analytics firm Coinmetrics, which offers a chart showing of bitcoin The 30-day Pearson correlation between bitcoin and the S&P 500 fell below 0.20, the lowest level since September 2021.
This is a major reversal from mid-2022, when Bitcoin And stocks were moving largely in lockstep and the 30-day correlation briefly crossed 0.7.
And given the difference between the price of bitcoin (which has been rising) and the S&P 500 (which has been sluggish) over the past two weeks, this correlation will likely continue to decline.
If it falls below 0.08, it will hit a three-year low.
Why is bitcoin losing correlation with stocks?
In 2021 and 2022, bitcoin was largely viewed as a speculative technology/asset that should trade according to liquidity conditions like tech stocks.
This largely explains why the cryptocurrency saw such a huge pump in 2020 and 2021 as the US (and global) economy was fueled by fiscal and monetary stimulus, before aggressively pulling back in 2022 as stimulus was scaled back. was pulled (mainly through aggressive rate hikes from major central banks).
Bitcoin’s 2020/21 pump and 2022 dump meant that its price moved largely in tandem with the US tech stock sector.
But bubbles of a financial crisis That relationship is being tested in early 2023.
Instead of viewing bitcoin as a speculative asset (like a tech stock), investors may finally begin to view bitcoin how its creators and proponents have wanted them to view it all along — with a fiat-based central bank. -Concentrated fractional reserve banking system as a safe-haven alternative to
Bitcoin Shares Over the Past Week Have a Good Claim to the Title of “digital gold,
Bitcoin is up more than 40% from its prior monthly low of $20,000 as investors seek alternative, “hard” currencies/medium of exchange as the cryptocurrency rallies alongside gold prices.
Fiat currencies (such as the US dollar, euro and British pound) are not considered as hardy as gold and bitcoin because their value can be more easily eroded through inflation.
Bitcoin is thus holding a bid for a safe haven, as US stocks slide lower, investors fret amid uncertainty about how bad the current troubles in the bank sector are going to get, and how bad it is for the outlook for economic growth. Will affect
Here’s Why BTC’s Falling Correlation To Stocks Is Bullish
Bitcoin is not just some speculative technology that will probably go away soon.
It is a highly robust, indestructible, decentralized peer-to-peer payment system that provides a genuine, fair and transparent alternative to the existing financial system.
And investors ultimately see this as a bullish sign for the cryptocurrency.
If the banking crisis deepens And as stocks slide as a result, this is likely to further fuel safe-haven gains in bitcoin.
Meanwhile, even if the US authorities manage to head off a crisis, the critical and tight-fisted approach from the US Federal Reserve has suffered a fatal blow.
In other words, the end of the hiking cycle is probably visible within touching distance.
And if easier financial conditions are ahead (meaning lower US yields) that should bode well for both gold and bitcoin.