Although Bitcoin is often described as digital gold, the price action shows that dominant crypto is more positively correlated with stocks. The chance that Bitcoin is in sync with the stock prices is now the highest in 17 months.
Bitcoin’s correlation coefficient with the S&P 500 stock market index, which tracks the performance of 500 major companies listed on US stock exchanges, reached 0.49, the highest level since October 2020, say data from market analysis Arcane Research.
This means that Bitcoin is almost perfectly in the middle of the scale, which measures the strength of the relative movements between dominant crypto and stocks. Its values usually range between 0 and 1, with 0 indicating no correlation and 1 indicating an extremely strong correlation.
Bitcoin’s correlation to the S&P 500 has been higher for just five days in BTC’s history, demonstrating that the current correlation regime is unprecedented in BTC’s history,” the company said.
Bitcoin and United States stocks have moved closer together during the pandemic.
They have acted similarly amid Russia’s war in Ukraine, regulatory uncertainty in China and the US central bank’s recent decision to raise interest rates.
A higher correlation with equities indicates that Bitcoin is evolving beyond gold, which is traditionally considered the safest investment or ‘safe haven’ in times of inflation and financial uncertainty.
Shifting gold means assets become riskier. Bank of America already classified Bitcoin as a risk asset. Risk assets are typically characterized as highly volatile.