The correlation between the prices of the flagship cryptocurrency, NASDAQ and S&P 500 rates rocket, here’s why
Lennix Lai, director of top-tier cryptocurrency exchange OKEx, shared an infographic to display the correlation between the prices of Bitcoin (BTC), Gold (XAU), the NASDAQ and S&P 500 dynamics.
High-growth tech stock
According to Mr. Lai, the correlation between the three indicators has increased over the years. Q1, 2020, was the watershed moment: the correlation of the Bitcoin (BTC) price with the NASDAQ and S&P 500 indexes spiked.
— Lennix Lai (OKEx) (@LennixOkex) June 3, 2021
Meanwhile, the correlation between Bitcoin (BTC) and Gold (XAU) also increased but not so dramatically. That is why Mr. Lai is certain that people treat Bitcoin (BTC) and Gold (XAU) as different sorts of investments.
For many people, Bitcoin (BTC) evolved into a “high-growth tech stock” as they are trading it this way: the BTC/NASDAQ correlation jumped to 0.6 in Q2, 2020, while the BTC/S&P 500 correlation printed a record in Q3, 2020.
Thus, the most popular narrative of Bitcoin (BTC) maximalists, the “Digital Gold” narrative, should be reconsidered, according to the chart shared by the OKEx director.
When correlation matters
Many analysts and researchers attempted to explain the correlation between Bitcoin (BTC), Gold (XAU) and stocks. Analysts at Skew are certain that Bitcoin (BTC) is still correlated with Gold (XAU).
Analyst Charles Edwards at Capriole Investments describes two situations. As markets are captured by either extreme fear or extreme greed, Bitcoin (BTC) is correlated to stocks. While the dust settles, the correlation vanishes.
The turbulent Q1, 2020, proved that Mr. Edwards’ theory is valid for the ongoing stage of Bitcoin (BTC) progress.