The Positive Correlation Between Bitcoin And The Stock Market Is Near All-Time Highs

March 23, 2020 / by Crypto.IQ

Over the past month the stock market and Bitcoin (BTC) seem to have been behaving relatively similarly, and indeed data shows that the positive correlation between Bitcoin (BTC) and the S&P 500 is near an all-time high. This is a drastic contrast from the conditions before this month, where stocks and Bitcoin (BTC) were actually inversely correlated.

The stock market began to go off a cliff around February 20, with the S&P 500 declining from 3,380 points to 2,200 points, and the Dow Jones Industrial Average (DJIA) declining from 29,550 points to 18,300 points. Simultaneously, Bitcoin (BTC) dropped from $10,000 to as low as $3,850.

More specifically, on days where stocks did particularly bad, it seems Bitcoin (BTC) declined as well, although this relationship did not hold true every day, since this past week Bitcoin (BTC) staged an 80% recovery rally while stocks continued to decline.

Empirically, the rolling 30 day correlation between Bitcoin (BTC) and the S&P 500 is now in excess of 0.60, which is the highest positive correlation in history. This is a stark contrast from earlier this year, where there was an inverse correlation as strong as -0.40, meaning stocks and Bitcoin (BTC) were moving in opposite directions.

In general, the correlation between Bitcoin (BTC) and stocks has been oscillating between positive and negative throughout most of Bitcoin’s (BTC) history, and most of the time the correlation is so weak that it can be considered an insignificant correlation. However, this past month shows that Bitcoin (BTC) and stocks can sometimes become truly correlated.

That being said, periods of strong positive correlation between Bitcoin (BTC) and stocks have   never lasted long in the past, and it can be expected that Bitcoin (BTC) and stocks will become uncorrelated once again at some point in the coming months.

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