there is a positive correlation between Bitcoin price and US stock priceswhich reached a record high in 2022, is vanishing. Bitcoin Bulls will be hoping that this decoupling bodes well for bitcoin, as it could mean that the ongoing US stock market struggles may subside for the world’s largest cryptocurrency.
as per the chart submitted by coinmetricsThe 60-day Pearson correlation between BTC price and the closing price of the S&P 500, the most widely followed US equity market benchmark, fell to its lowest level since April 2022 at 0.30 earlier this week.
The correlation was set to reach an all-time high of 0.667 in September 2022, following a sharp rise earlier in the year in which crypto and equity prices reacted to a stronger-than-expected uptick in US inflationary pressures and the resulting tightening. Unite in the midst of concern. From US Federal Reserve,
The correlation between the two asset classes has declined in the wake of crypto’s impressive rally since the start of the year. Last year, bitcoin was up nearly 35%, while the S&P 500 was up a modest 4.0%.
Does low correlation to stocks mean the bear market is over?
of bitcoin Elevated correlations in US equity markets were a clear feature of the ongoing bear market in late 2022, which saw BTC slide 77% from its 2021 record high of $69,000 from the lows in November.
Earlier, 60-day Pearson correlation Bitcoin And the S&P 500 was only as high as 0.3 on a few occasions, and often fell below zero. The years leading up to 2022 were characterized by significant price gains when bitcoin’s correlation to US stocks was very weak.
Bitcoin surged over 2,000% from its 2018 low to $3,000, a 2021 all-time high. Bulls may be hoping that a low correlation between bitcoin and stocks, as was the case from late 2018 to late 2021, is a feature of the upcoming bull market.
Equity investors fear that the Fed’s aggressive efforts to contain US inflation, which is currently more stable than expected with the US economy outperforming expectations, will result in a deeper corporate earnings slump later in the year, which earlier Since then giving further blow to the stock valuation. Higher risk-free interest rates (i.e. higher US government bond yields) triggered a shock.
That’s why almost no one is betting on a near-term boom in US stock prices toward record highs. But despite ongoing pessimism about the outlook for US equities, a weakening correlation could allow bitcoin to rally this year. However, some on-chain indicators are concerned as a result of the pullback in BTC price from the recent high of $25,000. bitcoin market profitability Sending a less bullish signal on the outlook for the world’s largest cryptocurrency by market cap. Some Fear Bitcoin May Be Headed below $20,000 In the near future.