Bitcoin, correlation with equities rises
Last Update: 25/12/2024
Cryptocurrencies’ long road to becoming part of investment portfolios also involves evaluating their correlations with other assets. With nearly 10 years of listing, let’s see how the correlation between bitcoin and equities is moving and what we can infer from it.
In the above graph we have drawn the correlation trend between Bitcoin (BTC-USD) and S&P500 (SPY) since 2015. As usual, we recall that correlation can be positive (0 to 1, asset prices moving in the same direction), negative (below zero and up to -1, asset prices moving in different directions) or zero (no correlation between asset price trends).
The graph shows that from 2020 onward, the correlation between bitcoin and equities has become stably positive, with levels exceeding half a point in some time intervals. The 3-year average shows a positive correlation of 0.47; the long-term correlation drops to 0.30. Over the course of 2024, the positive correlation between the major cryptocurrency and the S&P500 has strengthened.
These numbers seem to tell us that the trend of bitcoin basically follows that of the stock market, with a stronger positive correlation than that of, for example, gold. Hard, then, to think of it as a hedge against equities; possible, instead, to consider it an attractive asset for diversification. But beware, cryptocurrencies continue to be weighed down by their considerable volatility, an element that still makes them difficult to trade at the moment.
