Bitcoin's Correlation With Stocks Hits Highest Level Since Cryptocurrency Gained Mainstream Attention

A coefficient of 1 means the assets move in sync, while minus-1 indicates they move in opposite directions. After the Fed began raising its target rate in early 2022, the correlation exceeded 0.8, the highest since Bitcoin gained mainstream attention.

The correlation between Bitcoin and Nasdaq has reached its highest level since the cryptocurrency gained mainstream attention, highlighting its increasing sensitivity to broader market trends.

A coefficient of 1 indicates that assets move in sync, while minus-1 shows they move in opposite directions. As the Federal Reserve began raising its target rate in early 2022, the correlation between Bitcoin and Nasdaq exceeded 0.8. This marks the highest correlation since Bitcoin entered the mainstream consciousness.

“People are refocusing on crypto as a growth asset or an asset that represents network value,” said Joshua Lim, co-founder of trading firm Arbelos Markets. “Its capability as a technology and value transfer mechanism means it will be more correlated to other growth assets, such as the Nasdaq, tech equities, and other similar assets.”

Bitcoin proponents have often touted the coin as an uncorrelated asset, largely impervious to government policies and external factors.

However, the cryptocurrency's price movements have shown a close relationship with broader market trends, especially growth assets, due to its increasing adoption by mainstream investors. Bitcoin's correlation with the S&P 500 has also been rising, reaching 0.7 in 2023, up from 0.3 in 2021.

After a turbulent 2022, which saw a deep crypto winter and the collapse of several major firms, Bitcoin's price has rebounded sharply in 2023, fueled by optimism and a wave of new investment. The world's largest cryptocurrency has surged over 50% this year, trading above $24,000 on Monday morning.

Bitcoin's proponents have long argued that the coin is an uncorrelated asset, not influenced by governments and showing resistance to external factors.

Introduced in 2008 by an anonymous entity known as Satoshi Nakamoto, Bitcoin aimed to create a decentralized currency that would operate outside the control of governments and central banks. Over the years, Bitcoin has been promoted as digital gold, an inflation hedge, and a store of value.

However, narratives about Bitcoin's price volatility have been challenged by the close tracking of broader market trends, especially growth assets, as the cryptocurrency becomes more mainstream.