Bitcoin‘s mainstream acceptance over the past few years has managed to link the top cryptocurrency with traditional finance in more ways than one. While institutional interest has been a positive sign for the digital asset industry, it has also caused Bitcoin’s price to follow that of US stock markets.
Concerns regarding the rising correlation between Bitcoin and the S&P 500 had been growing for some while now, ergo, these have freshly been renewed as macro events cause both markets to plunge.
In fact, the correlation between US stocks and Bitcoin reached a new all-time high earlier this week, even as both markets continued to lose points over rising threats of war between Russia and Ukraine.
Source: CryptoQuant
As can be seen in the aforementioned chart, this correlation has been rising steadily since mid-2021 amid macroeconomic pressures weighing on both markets. This includes the U.S Federal Reserve’s statements on rising inflation and the decision to hike interest rates to curb the same.
Santiment
However, with Russia invading its neighboring Ukraine on 24 February, riskier markets such as equities have plunged deeper still, along with most top cryptocurrencies. Even as recovery could be noted earlier today after U.S sanctions against Russia calmed investor sentiments, gold has interestingly emerged as a winner amidst this crisis. Investors could be seen hedging their capital into this traditional haven, rubbishing earlier held beliefs that Bitcoin was a better store of wealth than gold.
#bitcoin down, gold up. Seems most investors see bitcoin as a tech stock like Google or meme stock, not as a commodity / digital gold. pic.twitter.com/e56kuqbaIB
— PlanB (@100trillionUSD) February 24, 2022
While this proves that Bitcoin is yet to truly become a safe haven asset “from a macro perspective”, Santiment noted in a report that its high correlation with the S&P 500, which tracks the largest 500 companies trading on American markets, proves that institutional interest in crypto has grown manifold as stock investors pour into the market.
Furthermore, the 60-day correlation between BTC and S&P 500 stood at 0.6, out of the highest possible score of 1, noted Bloomberg, indicating that both markets were behaving in a very similar manner. The divergence of this indicator, however, could foreshadow the next bull run for Bitcoin, whose 24-hour price change stood at 10.2% at press time.
