What looks like a tech action and acts like a tech action but isn’t? The answer, increasingly, is Bitcoin, at least in terms of its market value.
The price of the cryptocurrency is more correlated to stock prices in the tech-heavy Nasdaq stock index than at any time since July 2020. According to a new Arcane Research reportthe 30-day correlation between Bitcoin and Nasdaq is 0.70.
Correlation is measured on a scale of -1 to 1, where -1 means prices are always moving in opposite directions and 1 means they are in perfect sync. A 30-day correlation attenuates some of the daily noise by using a longer time horizon.
While Bitcoin is increasingly correlated with risky assets like Google and Tesla stocks, it has shifted to a negative correlation with gold. It’s -0.45, it’s just around an all-time low. In August 2020, BTC to gold reached a all-time highalthough the pair has historically fluctuated between positive and negative correlations, providing little guidance to market speculators.
The price of gold has fallen from $1,805 an ounce at the start of 2022 to $1,952 today, per Monex data; it has remained roughly static over the past month. Since the start of the year, Bitcoin has fallen from $46,730 in value to $41,326, according to data from CoinMarketCap; it is also flat for the month, but has seen higher volatility than gold.
Ironically, Bitcoin is often referred to as “digital gold” because some proponents view it as an inflation hedge.
Inflation is definitely in play in today’s markets. The most recent US consumer price index, released by the Bureau of Labor Statistics, pegged annual inflation at 8.5%, the highest since Ronald Reagan’s first term. This means that consumer items are more expensive than a year ago; the dollar doesn’t go that far.
Neither, it seems, neither Bitcoin nor stocks. After a stellar 2021, the Nasdaq is down 13% on the year. No wonder it’s almost the same as Bitcoin, which lost nearly 12% of its value.
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