- Bitcoin’s 30-day correlation coefficient with TradFi bellwethers remained negative.
- Bitcoin’s volatility relative to gold has steadily declined over the past few years.
Sentiment around crypto markets and traditional finance has diverged dramatically in recent months. In particular, developments in one area had no impact on the other.
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The world’s largest cryptocurrency, Bitcoin [BTC]showed increasing decoupling from popular stock indices such as the S&P 500, the Dow Jones Industrial Average and the tech-heavy Nasdaq 100, according to on-chain analytics firm IntoTheBlock.
Bitcoin’s 30-day correlation coefficient with these TradFi bellwethers remained negative.
#Bitcoin continues to be negatively correlated with traditional financial markets. Of the major indices, the Dow Jones Industrial Average (DJI) shows the most significant negative correlation, at -0.8. For detailed insights, visit: https://t.co/Wx8RxQwatF pic.twitter.com/Ze8x1yqmte
— IntoTheBlock (@intotheblock) August 4, 2023
When analyzing the recent price trajectories of the entities in question, it was clear that the digital assets and real-world assets were moving on different wavelengths.
Bitcoin and stocks diverge
The coined king has been sluggish lately, with the price at the time of publication 0.76% lower than three months ago. The asset was stuck in a narrow trading range between $29,000 and $31,000 after its last meaningful rally in June.
Meanwhile, stocks have risen. Big Tech has pumped 15% over the same period, while the S&P 500 and the Dow are up 8.26% and 4.13%, respectively.
Source: IntoTheBlock
The development has meaning. For a particularly long time, both Bitcoin and stocks have been part of the risky asset category.
Ryan Grace, Head of Digital Assets at Tastycrypto, attributed Bitcoin’s negative correlation to crypto-specific events such as regulatory headwinds. He pointed out that the lack of a direct catalyst has drawn traditional investors away from Bitcoin and crypto.
Grace added that the excitement and popularity surrounding AI has also contributed to an increased interest in tech stocks over crypto markets.
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Bitcoin as an inflation hedge
In short, trends like this are generally welcomed by proponents of the Bitcoin safe haven narrative. Once the asset stops reacting wildly to any real-world trigger, it can be used as a haven in times of financial risk, similar to gold.
Prominent on-chain analyst Will Clemente took to Twitter to reveal how Bitcoin’s volatility relative to gold has been steadily decreasing over the past few years. At the time of writing, “Digital Gold” volatility has hovered around multi-year lows.
Source: Glassnode