The correlation of Bitcoin with stocks and bonds reaches a 3-month low

The correlation of Bitcoin with stocks and bonds reaches a 3-month low

Since the markets have to struggle with increasingly uncertain macroeconomic prospects, the days on which Bitcoin act like large technology shares could be counted. These may not be good news for crypto retailers.

The correlation of the largest digital currency with the total bond index and the NASDAQ 100 index has fallen to a three-month low according to a new data report by the research company Kaiko.

The decoupling of Bitcoin from Big Tech has been due to his underperformance in the past few weeks. Both stocks and bonds have had unusually strong declines since the beginning of 2022, researchers referred to it, but Bitcoin has developed worse since then. Bitcoin has dropped by about 50 % since the beginning of the year and moves in harmony with global risk mood.

The collapse of Terra ecosystem, followed by some of the largest companies in the industry, has caused divergence that apparently continues because the markets are looking for a direction, the report says.

"Last year, crypto and stock markets acted closely together and experienced record-high correlations in May," said Clara Medalie, Strategic Initiative and Research Director at the data provider Kaiko. "In the past few months, however, this correlation has weakened slightly after the cryptoma markets have suffered a sale that was larger than the S&P 500 or the Nasdaq stock indices."

In May, the correlation between Bitcoin and the technology -heavy Nasdaq broke through 0.8 for the first time - Bitcoin's tandem trade with the wider S&P 500 also reached similar levels in early May. In June, the correlation between Bitcoin and the S&P 500 fell to about 0.5 and since then, according to Coin Metrics Data . A coefficient of one means that the corresponding assets are fully aligned, while a negative value of one signals the opposite.

The US Bureau of Labor Statistics is expected to publish the consumer price index for July on Wednesday, which, according to Medalie, could make cryptos to adapt more to the wider markets.

"What we saw last year is that the correlations tend to increase for important publications of economic data, such as session notes of the Fed or Inflation figures," added medal.

others agreed and found that a trend reversal for Bitcoin would be a challenge without a rally on the wider market.

"Bitcoin's rally is stalled because crypto dealers have to see what happens to tomorrow's inflation report," said Edward Moya, Senior Market Analyst at Oanda. "Inflation killed Bitcoin at the end of last year, and if the price pressure shows significant signs of weakening, Bitcoin could be able to break out beyond its recent trade span

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The contribution "Bitcoin’s Correlation with Stocks, Bonds Hits 3-month low" is not a financial advice.