Is Bitcoin Really Disconnecting from Stocks? Experts weigh in

There is a wry humor in it Bitcoin have at times been very closely correlated with traditional markets.

Bitcoiners generally prefer that BTC does not have a high correlation with traditional assets, such as stocks and bonds. After all, one of the core tenets of the world’s largest cryptocurrency by market capitalization — $379 billion at the time of writing, according to CoinGecko — is that it bypasses traditional finance.

It is therefore self-declared Bitcoin fans, like Gemini co-founder Cameron Winklevoss, notice when BTC seems to have stopped tracking stocks and bonds.

“Bitcoin has been remarkably resilient in recent weeks despite the stock market losing trillions in value,” he tweeted earlier this week. “No idea if this is the bottom, but there has been a strange disconnect.”

It’s true that Bitcoin has recently outperformed the stock market indexes, but analysts say there is false evidence that a true disconnect has occurred.

Compared to last week, Bitcoin is up 3% while the Nasdaq 100 and S&P 500 each lost 1%. In fact, that’s true as far back as 90 days, according to data from blockchain analytics firm IntoTheBlock. Compared to three months ago, Bitcoin is up 1% while the Nasdaq 100 lost 3% and the S&P 500 lost 4%.

Any further than that involves comparing the current market downturn to a time before the Federal Reserve’s Federal Open Market Committee (FOMC) implemented three consecutive historically high rate hikes, pushing mortgage rates to their highest level since 2008.

Blockchain data platform IntoTheBlock’s own correlation matrix shows that Bitcoin is still fairly closely correlated with the Nasdaq 100 and S&P 500 – both at 0.7.

Calculating a correlation gives a value between -1, which means that the two things being compared always move in opposite directions, or 1, which means that they always move in the same direction.

During the first week of September, the correlation between Bitcoin and the two stock indices was much higher, at 0.9.

“Correlations with stocks have actually fallen in recent weeks but are still quite high,” Lucas Outumuro, director of research at IntoTheBlock, told Decrypt.

Although the correlation has weakened over the past month, Outumuro said there is reason to believe it could rise again, citing “the risk of liquidity being reduced due to interest rate hikes and [quantitative easing] continue to put pressure on risk assets, including crypto.”

The pseudonymous Twitter user “Unusual_Whales”, who runs the options data platform of the same name, also told Decrypt that it is too early to tell whether Bitcoin price movements have stopped mirroring traditional markets.

“There may be a lead-layer effect,” they said. “Hard to say given that the market itself changed so much this week.”

The move came from the Bank of England, which announced on Wednesday that it had begun aggressively buying bonds to stabilize markets after the government’s economic plans sent interest rates soaring and the British pound to record lows. since the 80s.

“The correlation between BTC and the S&P500 (SPY) has shot up to all-time highs since March 2022 as both markets have been impacted by the actions of the FED and other macro events,” Nate Maddrey, who heads research at Coin Metrics, told Decrypt in an email.

“Historically, BTC has not been highly correlated with the stock market, so it is always possible that the tide will start to turn back towards lower correlation. But at this point, the data does not show significant detachment.”