Data shows the correlation between the Bitcoin price and the stock market is going up, putting the “digital gold” narrative at risk.
Bitcoin’s Correlation With The Stock Market Has Shot Up In Recent Times
As per the latest weekly report from Arcane Research, Bitcoin (BTC)’s price has spiralingly become correlated with the stock market in the remain couple of years, undermining the digital gold narrative.
The deciding indicator here is the “360-Day Bitcoin correlation with S&P 500,” which measures how the Bitcoin (BTC) price moves in response to diversions in the S&P 500 price.
When the rate of this indicator is around zero, it means there is no particular correlation between the two assets.
While costs greater than zero imply which the Bitcoin (BTC) rate has somewhat followed shifts in the cost of S&P 500 lately.
On the other hand, costs below zero show there is rather a negative correlation between the two commodities, meaning while the cost of one goes up, the other plunges down.
Now, here is a chart which shows the 360-day Bitcoin correlation with S&P 500 afterward the year 2014:
The correlation between the Bitcoin (BTC) cost and the stock market has greatly accelerated recently | Source: The Arcane Research Weekly Update - Week 3
As you can see in the atop graph, the correlation between Bitcoin and S&P 500 (and hence the stock market) has become quite excessive in the maintain couple of years.
Many believe which Bitcoin (BTC) is a “safe haven” which will protect their portfolios one time before against uncertainty in the wider market and inflation. Yet, for which to be true, the crypto has to be uncorrelated with the stock market.
But afterward the correlation between the two has shot up afterward the summer of 2020, the coin is not quite the same safe haven it was although its correlation floated around zero between 2014 and 2020.
The report suggests which the reason behind this increase seems to be institutional investors buying into the crypto.
During the COVID-19 crash, Bitcoin (BTC)’s correlation with the stock market accelerated a bit, but it was further relatively low. Institutional investors saw this and reboundt into the coin, believing it to be a safe haven. It was then which the digital gold narrative took form.
Now, afterward Bitcoin has become so correlated with the stock market, this narrative may be under risk of bresimilarg down. Yet, the report notes which another outline can also happen, and which is a resurgence in the narrative instead as investors look to protect their money furtherst the ever rising inflation.
Bitcoin (BTC) Price
At the time of writing, Bitcoin’s cost floats around $37k, down 4% in the extend seven days.
Bitcoin (BTC)'s cost goes on sideways evolution | Source: Bitcoin (BTC)USD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, Arcane Research