Digital gold? No, Bitcoin is now closer to tech stocks

wallstreetcn ·  May 19 11:20

Source: Wall Street News

Bitcoin is becoming more and more like a growth asset, and its correlation with US technology stocks has climbed to its highest level since August last year.

Bitcoin rose strongly this week. It stabilized at the 66,000 US dollar mark on Friday. Bitcoin has accumulated 58% growth so far this year, while the NASDAQ 100 Index rose 11% during the same period. The two have emerged in a highly synchronized trend.

According to media reports on Friday, the 90-day correlation coefficient between Bitcoin and the tech-dominated Nasdaq 100 Index climbed to 0.46 this week, a new high since the end of August last year. Since the Federal Reserve began raising interest rates in early 2022, the correlation between Bitcoin and risk assets once soared to a record high of 0.8 or more.

Joshua Lim, co-founder of trading firm Arbelos Markets, said:

People are once again focusing on cryptocurrencies as a growth asset or an asset representing the value of the network. Its ability as a technology and value transfer mechanism will be more relevant to other relatively growing assets such as the NASDAQ and technology stocks.

Bitcoin advocates have long touted it as an irrelevant asset, unfettered by any government, and unlikely to be influenced by external forces or factors. For many years, it was considered a digital version of gold, an inflation hedge, and a value preservation tool, but today Bitcoin's price fluctuations have shattered those claims. Earlier this year, the launch of a Bitcoin futures ETF listing in the US opened the door for more investors to invest in Bitcoin.

Toby Winterflood, CCDATA's Chief Product Officer, said:

Since the beginning of 2024, you can see a high positive correlation between the S&P 500 index and Bitcoin, which is very unusual and completely breaks the theory that it is a reserve of value. I think the main reason why it is currently high is that Bitcoin ETF has developed into the fastest growing ETF product in history.

The impetus for traditional asset allocators to pay attention to and buy this asset class includes US ETFs, Bitcoin's record high in March, and Bitcoin's “halving” in April. Now that these catalysts are over, the market is refocusing on the macro environment.

According to data released last Wednesday, the month-on-month growth rate of US core inflation declined for the first time in six months in April, moving in the direction that Federal Reserve officials wanted to see. Despite this, several Federal Reserve officials said on Thursday they should keep interest rates at a high level and await more evidence that inflation is slowing down, suggesting they are not in a hurry to cut interest rates. Analysts believe that if the Federal Reserve cuts interest rates, this will be beneficial to risky assets, and the same will be true for cryptocurrencies.


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