Bitcoin is still highly correlated with the stock market

New data shows that the correlation between Bitcoin and the stock market has been high for the past few months. Because: The cryptocurrency closely followed the S&P 500 and the NASDAQ.

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Bitcoin continues to mimic US stock market movements in 2022

True, according to Arcane Research’s latest weekly report, BTC is more volatile than the stock market. But: The movements of the cryptocurrency were still quite similar to the latter.

Notice

So far in 2022, both the stock market and Bitcoin have had a tough time. Year to date, however, BTC is down 51%. On the other hand, the S&P is down 14% and the NASDAQ is down 22%, meaning the losses are much smaller than BTC.

Here’s a chart showing how these assets have performed relative to gold in the first seven months of this year:

Bitcoin vs stock market

Gold appears to be the strongest asset during the period | Source: The Weekly Update by Arcane Research – Week 30, 2022

As you can see in the chart above, Bitcoin’s one-year movements were very similar to the movements of the S&P 500 and NASDAQ.

However, what can also be seen from the chart is that many BTC price movements have been much larger than those of stock market values. From this it can be concluded that the correlation between the crypto markets and the stock is quite high this year.

The main reason for the high correlation of the markets is the increased presence of institutional investors in Bitcoin. In times of macroeconomic uncertainty, such investors seek to reduce their risk.

Therefore they are withdrawing from markets like BTC. One of the recent events that has caused cryptocurrencies to fall against the stock market is ever-increasing inflation.

The report notes that the increased importance of monetary and fiscal policy has also increased the correlation between BTC and the stock market, but also most other financial assets.

Remarkably, gold had the best year of all the assets considered, with the precious metal down just 4% in the first seven months.

How is the Bitcoin price behaving?

Currently (as of this writing), the price of Bitcoin is hovering around $23.2k – down 3% in the last seven days. In the last month, however, the cryptocurrency has gained 14% in value.

The chart below shows the development of Bitcoin price over the last five days.