The value of the asset rose to $12,473 on August 17, after volatility hit Bitcoin‘s consolidation market. However, since then the traded value of the asset has remained in the middle of $11,000. At press time, BTC was rated at $11,586 with a high correlation coefficient of 0.4751 with the S & P500. This was not an ideal situation for traders in the market, but given the price movement at the time, this was to be expected.
Traditional markets and Bitcoin correlation: S & P 500 effect
The two entities have been moving together since the start of the U.S.-China trade war in the first quarter of 2018, according to Plan B, the observations show. This incident, along with the BTC market, caused a downturn in the S&P market. Following this, the 4th of 2018. the quantitative easing that took place in the quarter is that of the correlation shared between BTC-S and P500, and finally the 1st of 2020. it was another example of the miserable COVID-19 decline seen in the quarter.
The biggest reason for the increase in correlation between the stock and Bitcoin was during the collapse associated with COVID-19. In this liquidity event, leveraged traders were hit by margin calls and had to sell their fixed assets, including Bitcoin and gold, to obtain cash, so there was a high correlation between gold and Bitcoin. However, correlation with the stock market increased as liquidity escaped the BTC market.
Now that volatility has returned to the market once again, the correlation with Gold is on the rise. According to econometrics, “demand for fixed assets has increased as both gold and Bitcoin have completed the V-shaped recovery.” BTC was considered digital gold and tends to have a higher correlation with gold as both entities are driven by the same macro narrative. But this trend was only valid in the short term.
Given the huge difference between BTC and Gold‘s market value, BTC’s rise was much higher than gold’s. But its volatility will also be much higher than golds. However, an increase in the value and volatility of BTC could once again raise its correlation with the yellow metal.
