The stock market correlation with Bitcoin remains high, but why?
Data show that the Bitcoin correlation with the US stock market has remained at a high value lately as it saw an increase over the past week.
Bitcoin correlation with the stock market observed weak growth in the last week
According to the latest weekly report from Arcane Research, BTC’s correlation with NASDAQ and the S&P 500 is currently at a high value of more than 0.5.
The “correlation” here is a calculation that measures how the changes in the price of another asset affect it to Bitcoin.
The values of the indicator above zero indicate that there is a positive correlation between the crypto and the asset right now. This means that BTC is currently moving in the same direction as the asset.
On the other hand, negative correlation values suggest that the crypto responds to changes in the price of the asset by moving in the opposite direction.
Related reading | Crypto company WhaleFin signs $ 42 million kit deal with Spanish football giant Atletico Madrid
Also higher above zero / deeper below zero are the values of the metric, the stronger is Bitcoin correlated with the asset.
Now, here’s a chart showing how the Bitcoin correlation with NASDAQ, S&P 500 and Gold has changed since January 2021:
Looks like there isn't much correlation between Gold and BTC at the moment | Source: Arcane Research's The Weekly Update - Week 27, 2022
As you can see in the graph above, the Bitcoin correlation with US stocks NASDAQ and S&P 500 has been high for several months now.
Back in May, the indicator reached a peak value of around 0.8. But shortly after, due to the Terra USD collapse, the crypto market crashed separately from the shares and thus the correlation fell.
Related reading | The Fed measures inflation in Bitcoin terms, trying to deceive the public
However, as the CPI report hit in June, correlations began to rise again as investors withdrew from assets such as BTC to manage risk.
This was followed by a period in which the uncertainty in the crypto market grew due to the collapse of several lending companies, which led to the correlations observing a small decline again.
The report notes that as the cryptospecific uncertainty is resolved, the correlations should resume their upward trend. Over the past week, the value of the metric has already observed a slight increase.
The latest CPI report also came yesterday, revealing that inflation rose 9.1% in the last month. Like the previous report, this may also push Bitcoin’s correlation with the stock market further up.
BTC price
At the time of writing, Bitcoin’s price is floating around $ 20.2k, down 3% in the last week. The chart below shows the trend in the price of the coin over the last five days.
The price of the crypto seems to have surged up over the past day | Source: BTCUSD on TradingView
Featured image from Chris Liverani on Unsplash.com, charts from TradingView.com, Arcane Research
