A recent post on social media site X was all about Bitcoin, which is the most significant cryptocurrency by market value. In this post, Jurrien Timmer, an executive at Fidelity, made an interesting point. Timmer said that Bitcoin now has a “largely negative correlation” with the S&P 500, which is a key indicator of how well the US stock market is doing.
“For those considering Bitcoin within a 60/40 investment strategy, it’s noteworthy that its correlation with stocks has significantly decreased, along with its annualized volatility,”Timmer said.
Bitcoin’s Diverse Correlation Trends
By showing a negative correlation, Bitcoin seems like an ideal choice for diversifying your wealth. But this makes it harder for cryptocurrency buyers to guess how prices will move, since BTC might not move in the same way that stocks do when macroeconomic factors change.
In 2022, both BTC and stock prices went down at the same time because the US Federal Reserve quickly raised interest rates to fight rising inflation. In March 2022, Bitcoin’s relationship with the S&P 500 jumped to almost 0.50, the highest level seen since 2020.
This event was a big loss for people who were pushing BTC as a powerful way to diversify investments that could work on its own, separate from traditional asset classes. Although some people thought BTC was a “inflation hedge,” others said it behaved more like a normal risk-on asset.
That being said, the connection trend started to go the other way in 2023. According to study done by K33 in March 2023, BTC was once again becoming a popular way to invest, acting as a “robust diversifier.”
However, Eric Chen, co-founder of Injective Labs, warned that Bitcoin’s link to stocks might get stronger again, especially since many ETFs were released earlier this year.
People are still interested in how the relationship between Bitcoin and standard financial assets is changing, which has an effect on investment strategies and the way the market works. News about BTC, Fidelity, and Jurrien Timmer
