Correlation between bitcoin and the stock market has reached zero
The probable reason is crypto traders waiting for the launch of spot BTC ETFs in the US
09.01.2024 - 11:48
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What’s new? The 40-day correlation between bitcoin and the Nasdaq stock exchange’s index (NDX) is zero, indicating that there is no correlation between these asset classes, CoinDesk reports, citing data from research firm Fairlead Strategies. The index has been consistently positive since early 2020, reaching a high of 0,8 during the bear crypto market in 2022.
What else is known? The breakdown of the correlation between BTC and the stock market can be explained by the fact that the cryptocurrency market has been focused on waiting for the launch of bitcoin-based spot exchange-traded funds (ETFs) in the United States since October 2023. According to media reports, the securities regulator SEC may allow them to enter the market as early as the first half of January.
The breakdown in correlation also means bitcoin can now act as a portfolio diversification tool. Fairlead Strategies expects the BTC and NDX correlation to remain low in the coming months, given the possibility of events such as the approval of the BTC ETF and the halving of the Bitcoin network in April. In addition, risk assets typically show a lower correlation to the stock market in bull markets compared to bear markets, the analysts added.
Halving is code’s embedded cut in half of the reward to miners for a mined block on the blockchain, which occurs approximately every four years. Initially, miners received 50 BTC; on November 28, 2012, the number dropped to 25 BTC, on July 9, 2016, to 12,5 BTC, and on May 11, 2020, to 6,25 BTC. In April 2024, the award will be cut to 3,125 BTC.
On October 25, 2023, Santiment experts recorded the strongest breakdown in correlation between BTC and the stock market in two years. At that time, the bitcoin rate rose to $35 116 (for the first time since May 2022), and at the same time, the S&P 500 stock market index fell to its lowest level since June 2023 (4184 points).
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