Bitcoin Reaches Record High Correlation to S&P 500

Bitcoin Reaches Record High Correlation to S&P 500

one-year correlation to the Standard & Poor’s 500 index hit record highs as the leading cryptocurrency continues to trade in lockstep with traditional financial markets.

The realized correlation, which measures the relationship between two assets, reached 0.367 on Thursday, up from -0.06 on January 1, according to data from . Bitcoin’s correlation to the benchmark index of U.S. stocks has made new all-time highs for the past three consecutive trading days. Before this, the previous high was on July 5, which lasted for one day. 

It’s worth noting that a coefficient of 0.367 is not overwhelmingly strong, but correlations on shorter-term bases are significantly higher. The closer a correlation coefficient is to 1.0, the more likely two things are to move in the same direction.

Bitcoin’s one-month correlation to the S&P, for example, reached a multi-year high of 0.79 on Wednesday, according to data from , indicating a much stronger short-term correlation trend as levels of investor uncertainty and expected volatility remain high. Analysts expect the trend to continue and even strengthen.

Bitcoin’s strong performance from March lows has fueled demand to and bitcoin, even with the coronavirus pandemic battering the economy. Investors are increasingly looking for inflation hedges like gold or bitcoin amid aggressive expansionary monetary policy, which has also pushed equity prices higher at the same time. 

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