If non-correlation is central to the appeal and functionality of Bitcon, why is the cryptocurrency increasingly tracking stock markets in 2020?
The correlation between Bitcoin and the S&P 500, the world’s most prominent stock market index, has been a topic of ample discussion since peaking during the March market rout.
This alignment has raised pertinent questions about Bitcoin’s utility as an asset that is supposed to be uncorrelated with traditional markets – an attribute assumed to be its core property.
A new report by Copper finds that Bitcoin’s mimicking of the S&P and other markets around the world may be signalling the presence of more sophisticated investors in the crypto scene than is generally assumed.
The study – which is one of the most thorough and rigorous on this topic, points to data depicting that across all markets, the majority of exchange trading volumes on major retail exchanges occur during market hours despite crypto having double the trading hours. Since 2018, trading volumes on weekends and non-trading hours only accounted for an average of 35%.
The analysis also finds that for prolonged periods, Bitcoin has been even more correlated to Japan’s price-weighted index, the Nikkei 225 than the S&P 500.
Dmitry Tokarev, CEO at Copper commented: Bitcoin’s correlation with traditional markets looks to be the result of the industry entering a new era that embodies a deeper, richer and more diverse ecosystem of professional traders. The data supports this view. Anecdotally, conversations with our partners and clients also lends weight to this view. But this is Bitcoin we’re talking about, during a period of extreme pressure on the markets. Time (and heaps more data) will tell. But for now, enjoy some incredible analysis from our team on the current state of BTC market correlation.”
You can download the full report here: Copper No3