Find the best broker for your trading or investing needs Bitcoin’s lack of correlation with the broader economy has proved a mixed blessing for the cryptocurrency. It has ensured an erratic and confusing price movement.
The flip side is that bitcoin has, sometimes, acted as a haven for investors interested in an asset class that is independent of the turmoil that afflicts stock markets. (See also: The Market Is Crashing.
Please Explain What All Of These Words Mean.) But the situation is fast changing. As bridges are built between cryptocurrencies and mainstream economy, events in one asset class may possibly begin affecting those in the other. The simultaneous crash in bitcoin price and equity market valuations last week set off a flurry of analyses investigating precedents to establish a correlation between both events.
The available proof is inconclusive and, subsequently, the derived results are uncertain. Analysts have cited investor appetite for risk as the main reason to connect both markets. The analysts at Datatrek, a research consultancy, analyzed three holding periods of 10 days, 30 days, and 90 days for bitcoin and S&P 500 dating back to January 2016. The current whipsaw in bitcoin prices has a 79% and 52% correlation to daily S&P 500 returns.
On a 90-day basis, that figure has a correlation ratio of 33%. According to the analysts, the previous correlation high was back in December 2017, when returns from bitcoin and the S&P 500 were in tandem 17% of the time. Read more from investopedia.com…
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