For two years, a surprising trend has emerged in financial markets: Bitcoin and Wall Street seem more connected than ever. A correlation that intrigues both traditional finance experts and cryptocurrency enthusiasts. This phenomenon marks a new stage in the complex relationship between these two worlds, formerly perceived as opposites.
Bitcoin increasingly linked to American stocks
In 2024, the correlation between Bitcoin and US stocks reaches all-time highs, according to data from IntoTheBlock.
The correlation coefficient, which measures the relationship between the movements of the two assets, has never been higher since 2022. This is happening as Visa and Mastercard curb innovation.
This observation seems surprising for an asset which, historically, wanted to be disconnected from traditional financial markets.
However, today, Bitcoin increasingly reflects the trends observed on major stock market indices such as the S&P 500 or the Nasdaq.
This rapprochement has many implications for investors. Once seen as a safe haven or hedge against market fluctuations, Bitcoin now follows the same economic cycles as stocks.
The question then arises: is it still the “digital gold” that many hoped for, or has it become a mere speculative asset influenced by the same forces as Wall Street? This correlation shows how far the financial landscape has evolved, where crypto and traditional finance are starting to share the same macroeconomic challenges.
Common economic factors: a shared denominator
One of the main reasons behind this correlation is the influence of overall macroeconomic factors.
Both markets, Bitcoin and US stocks, react to the same economic announcements, whether interest rates, inflation or decisions of the US Federal Reserve (Fed).
When the Fed announces a rate hike, for example, it affects not only stocks, but also Bitcoin, once considered resistant to these influences.
This change in behavior can be explained by the evolution of the profile of investors in Bitcoin. More and more traditional financial institutions, banks and investment funds have positioned themselves in this market.
Therefore, their investment strategies, often influenced by the overall economic outlook, now impact Bitcoin movements. The latter then becomes one asset among others in a diversified portfolio, thus losing part of its unique nature.
However, this correlation does not necessarily mean the end of Bitcoin's own volatility. On the contrary, it could intensify its price fluctuations.
If stocks take a hit due to a poor economic outlook, Bitcoin could follow, amplifying market movements.
For investors, this new reality means it is crucial to monitor economic indicators that influence both stocks and Bitcoin. Discover also, BlackRock which hits hard with 24 billion dollars in Bitcoin!
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