Bitcoin Sees Increasing Correlation With Stocks But Remains Relatively Weaker – Bitfinex

Bitcoin’s correlation with the US stock market has been rising for more than a month, as seen in the collective decline and recovery of various asset classes during the Japanese yen crisis in early this month and the Federal Reserve’s remarks at the Jackson Hole Symposium last week.

According to the recent edition of the Bitfinex Alpha report, the Pearson correlation metric, which measures the relative correlation of bitcoin (BTC) with the S&P 500 and the NASDAQ, shows an increase in the 30-day correlation between the assets. This ascent began on July 12; however, BTC has been relatively weaker than the indices since the August 5 capitulation low during the yen crisis.

Bitcoin’s increasing correlation with stocks

Following Fed Chairman Jerome Powell’s remarks at the Jackson Hole Symposium on August 23, BTC, the entire crypto market, stock indices and risk assets rose significantly, continuing the recovery seen since from the beginning of August. The increase could be attributed to Powell’s suggestion that the Fed was preparing to tighten monetary policy and cut rates. While risk assets rallied, the US dollar index fell more than 0.83%.

The S&P 500 moved to 5461, down 0.7% from its all-time high (ATH) and rebounding significantly from an 8% drop during the yen crisis. Notable increases were also recorded in other assets, including gold.

On the other hand, BTC saw a daily increase of 6%, its second highest daily move since May 20. Analysts said the jump in prices signaled the return of risk appetite in the markets.

Rally Price Room

Regardless of bitcoin’s recovery, it has remained weaker than stocks. This is evident in the S&P 500 which recovered its monthly highs and opening levels of August 1 on August 15 and approached its ATH on Friday, while BTC only reached $65,000 on same day However, analysts said it is common for higher volatility assets like BTC to move later than lower volatility counterparts like stocks.

Meanwhile, analysts said bitcoin is trading within the trajectory of past bull cycles. The market is showing a risk-on sentiment, encouraged by the current absence of excess supply and the imminence of rate cuts.

Also, there are relatively fewer leveraged longs in the market, which increases the room for BTC and altcoin prices to rise.

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