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Bitcoin’s correlation to the stock market continues to increase

Bitcoin illustration
Bitcoin illustration

The cryptocurrency market has recorded major price dips caused by ongoing market selloffs. While the crash has led most coins to move towards yearly lows, the correlation between Bitcoin price and the stock market has peaked. A recent report from Bloomberg shed light on Bitcoin’s price movements that are now similar to movements in US stocks. However, this correlation is only to a specific degree.

Stocks and BTC’s price move in tandem

The 40-day correlation between Bitcoin’s price and NASDAQ is almost at 0.66. According to Bloomberg, this is the highest it has been since 2010. The correlation between Bitcoin and S&P 500 also sits at a record high.

Following this similar price action, the dip in the cryptocurrency market has also been felt in the stock market. If Wall Street recovers from the recession, a turnaround in Bitcoin’s charts could be seen.

The financial markets were spooked last week by the highly anticipated meeting by the US Federal Reserve. The discussion is expected to revolve around the monetary policy to find ways that the institution can aid the US economy from rising inflation levels. One of the solutions that experts believe will be implemented is raising the interest rates.

In November, Bitcoin reached an all-time high of $69K following the increased use of the coin as a store of value. The coin was believed to be in demand from US investors escaping the highest level of inflation recorded in over three decades.

Institutional investment in Bitcoin

The increased correlation between Bitcoin and the stock market could be attributed to increased institutional interest. In its early years, the crypto market did not receive any support from Wall Street. The market was mainly composed of retail traders. However, this has greatly changed over the past year due to increased demand.

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In 2021, some of the leading institutions on Wall Street, including Goldman Sachs and JPMorgan, warmed up to Bitcoin. The two institutions launched crypto services to keep up with this demand.

The former CEO of Goldman Sachs, Lloyd Blankfein, recently held an interview with CNBC, noting that despite the recent dip in Bitcoin, the crypto market “is happening”. Before this, Blankfein was a major critic of the sector.

Moreover, the crypto sector is also entering the stock market. FTX, one of the largest exchange platforms, plans to unveil stock trading. Some cryptocurrency exchanges such as eToro and Robinhood offer both stock and crypto trading.

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