The correlation between Bitcoin (and the rest of the altcoins) and US stocks is a topic that is constantly talked about. Generally, it is assumed to be very high, considering that the factors influencing both sectors are almost the same. Likewise, the reaction of prices between assets in these two markets is also similar to economic and macroeconomic data.
In this way, the majority of people believe that the direction of the two markets is practically identical. For example, one can take the case of monetary policy decisions by the Federal Reserve. When there are decisions that cause stocks to fall, cryptos also fall and the same thing happens in the opposite direction.
Despite this, data from several sites shows that this trend is not as extreme as it appears at first glance. Thus, the correlation between stocks and virtual currencies would be getting further and further apart, according to recent work by CoinDesk.
From 2020, through 2021, and into 2022, Bitcoin’s correlation with stocks was certainly very high. For example, with the announcement of the pandemic in 2020, the indices collapsed scandalously, while the price of BTC fell below $4,000. In 2021, they rose at the same time and in 2022 they retreated in a single trend.
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Bitcoin’s correlation with the Nasdaq weakens. Source: TradingView
2024 represented a pullback in the correlation of Bitcoin and stocks
Although the correlation of BTC with stock market assets is clear in the periods named above, the matter changed noticeably in 2024. Thus, since March, Wall Street indices continued a strong rally based on hopes of a soft landing.
Artificial intelligence stocks led the Nasdaq’s rise for months. While all this was happening, the price of Bitcoin and the rest of the cryptocurrencies experienced a strong ebb. In some periods there were even fears of a new collapse to $40,000.
The reason for the detachment of the correlation between Bitcoin and stocks could be the different nature of the largest Cryptocurrency. While stocks are risk assets issued by companies, BTC is a decentralized store of value. Just like gold, its qualities make it radically different from company stock shares.
As large wallets take on cryptocurrency in this way, their behavior begins to differentiate. For example, the decision by MicroStrategy and other companies to adopt the token as a hedge against inflation completely changes their face in the eyes of investors.
Will this separation of correlation continue? The answer to this will depend on several elements, especially the fulfillment of Donald Trump’s promise to add BTC to the strategic reserves of the United States. If this fact is confirmed, there would be no doubt that Bitcoin stopped being a risk asset and became a store of value. In such a scenario, the correlation between Bitcoin and stocks could fall to lows.
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