Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

Bitcoin’s Correlation With Equities Drops to 1-Year Low

By The Tokenist (Ruholamin Haqshanas )CryptocurrencyJan 18, 2023 09:21AM ET
www.investing.com/analysis/bitcoins-correlation-with-equities-drops-to-1year-low-200634482
Bitcoin’s Correlation With Equities Drops to 1-Year Low
By The Tokenist (Ruholamin Haqshanas )   |  Jan 18, 2023 09:21AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
AVAX/USD
+17.28%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SHIB/USD
+3.23%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SOL/USD
+3.84%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IXIC
+0.95%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BTC/USD
+1.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TSLA
+10.99%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Following a strong rally in the crypto market over the past week, the correlation between Bitcoin and U.S. equities has been declining. As of this writing, BTC’s 30-day correlation to Nasdaq sits at 0.29, a level not seen in more than a year. The softening correlation, which implies the declining relevancy of U.S. markets to crypto, is generally considered a positive development.

What Factors Impact Bitcoin’s Correlation With Equities?

In a recent report, Vetle Lunde, a Senior Analyst at Arcane Research, identified four factors that usually impact the correlation between BTC and U.S. equities. These include institutional investors bundling BTC with other risk assets, growth companies holding BTC, selling pressure from miners, and a low-interest rate environment.

However, the developments in 2022 have led to almost all of these factors changing course. For instance, companies like Tesla (NASDAQ:TSLA) and miners don’t hold much Bitcoin anymore as they have already unloaded some of their holdings. In contrast, aggressive rate hikes by the Fed have put an end to a nearly-decade-long period of loose monetary policies. Lunde said:

“Compared to 2022, public companies hold far less BTC, miners have less BTC to sell, and several institutional players have left the market. All of these factors are in favor of softening correlations onwards.”

It is worth noting that certain market events can lead to a rise in the correlation between BTC and U.S. equities. After it was announced that inflation cooled down to 6.5% in December, BTC followed U.S. equities in tight tandem. However, the flagship cryptocurrencies managed to avoid losses as U.S. markets closed.

Bitcoin and the broader crypto market rallied during Asian hours after FTX’s fall. According to Arcane, the crypto market has seen a 16% upside during Asian hours vs. 10% during U.S. hours. Still, correlations matter during U.S. trading hours.

Crypto Market Likely to Stabilize Following Recent Rally

Over the weekend, cryptocurrencies surged higher in one of the most impressive rallies in about a year. Major cryptocurrencies broke above key resistance levels and extended their rallies, with the crypto market capitalization nearing $1 trillion, a level not seen since November last year.

Bitcoin, the world’s largest cryptocurrency, has reached a local high of above $21,500, while Ethereum has climbed to around $1,600. Both coins have gained around 20% over the past week. Solana, Shiba Inu, and Avalanche are the best performers among the top 20 cryptos, gaining around 35% over the past seven days.

However, Arcane believes the crypto market will stabilize in the short term. Over the past few days, Binance’s BTC/USD perpetual has seen several sharp retracements coinciding with market strength as shorts covered.

“At present, shorts are not providing much of an impetus to push prices higher in the short term. Open interest has stabilized, with no notable growth after BTC recovered to above $20,000, indicating that short traders have learned from last week’s unprofitable endeavors.”

Meanwhile, Bitcoin is trading around $21,200, essentially flat over the past day. Ethereum is also hovering around the $1,500 mark, while Shiba Inu has surged around 20% over the past day after short bets worth nearly $790,000 were liquidated.

***

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Bitcoin’s Correlation With Equities Drops to 1-Year Low
 

Related Articles

Naeem Aslam
Bitcoin: Is the Rally Resilient? By Naeem Aslam - Jan 23, 2023

The main focus is the relationship between the Bitcoin price and the equity markets. Bitcoin has a strong positive correlation with the risk-on factors, and it has been moving...

Bitcoin’s Correlation With Equities Drops to 1-Year Low

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email