Is Bitcoin Losing Correlation With Traditional Markets?

Economist Peter Schiff has highlighted Bitcoin's (BTC/USD) divergence from other risk assets as the leading cryptocurrency has seen a significant decline while stock markets have risen.

Schiff commented on Bitcoin’s sudden drop of over 5% in a short period of time. This sharp drop occurred simultaneously with the stock market rally, where the S&P 500 closed 1.61% higher at 5,543.22 and the tech-heavy Nasdaq Composite rose 2.34%, ending at 17,594.50.

The economist contrasted Bitcoin’ s decline with gold’s performance, noting that while gold initially pulled back, it later reversed direction and finished with gains. He noted that gold’s gains could have been more significant had investors not misinterpreted the day’s economic data.

Over the past month, Bitcoin has shown a growing correlation with the stock markets. According to The Block, its 30-day Pearson correlation coefficient with the S&P 500 has increased to 0.28, up from -0.81 in the previous month.

The correlation coefficient measures the strength of the relationship between two variables. A positive correlation coefficient indicates that the two variables are moving in the same direction – if stocks are rising, Bitcoin is rising and vice versa – while a negative correlation indicates the opposite.

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Similarly, Bitcoin’s correlation with the Nasdaq Composite strengthened, with the ratio rising to 0.13 from -0.83 a month earlier.

Alexander Stefanov