Bitcoin prices have long been correlated with a variety of factors, including adoption level, new developments to the technology, etc. However, lately, as Bitcoin has slowly made its way to the mainstream, correlations between Bitcoin price and the US dollar have increasingly become apparent in recent months, especially in times of COVID-19 turbulence. However, this correlation does not appear to be as clear-cut as data suggests that the macro-correlation to most traditional assets remains still low.
Stocks and Crypto have moved broadly sideways in recent weeks, following the incredibly strong rally that the markets experienced in the period after mid-March.
Some analysts believe that Bitcoin’s correlation with the markets has increased recently and will continue to increase as the Federal Reserve becomes more involved in the equity market. However, data shows that there is little noticeable correlation between the digital benchmark asset Bitcoin and other assets such as stocks.
Bitcoin struggles for clear direction
Bitcoin has moved in a trading range between $9,000 and $10,000 in the last few months. Selling pressure in the five-digit price range has proven to be insurmountable and has stopped the massive upward trend, which caused the crypto currency to rise by over 150% from its previous year lows.
The lack of present momentum is probably also a reason for the current correlation with the equity market. The reason why this trend has shifted slightly during recent stock market sell-offs is that most assets decline in times of panic.
Not even gold – a traditional and well-established “safe haven” – was immune to the downturn in mid-March, even though its performance was strong in the period thereafter.
The likelihood that the BTC price will decouple from the stock market in the coming months and the next bull market rellay begins is considered by many analysts to be extremely probable