Bitcoin Correlation with Macro Remains Strong, Despite Stability
Bitcoin’s correlation with macro markets hit new highs in 2022. This resulted in the price of the digital asset, and therefore the entire crypto market, closely following the movements of the stock and stock market. There were predictions that the cryptocurrency would decouple from the macro market over time, but the data shows that the correlation is still very high even now.
Following The Macro Market
One of the most prominent ways the Bitcoin macro market and correlation has shone has been with major events like the release of the CPI data. The latest IPC data release immediately led to higher than expected rates and the crypto market. Looking only at Bitcoin, it would have been normal to conclude that the market reacted independently, but in fact it had followed the movement of the macro market. Currently, the correlation between Bitcoin and the macro market is near multi-year highs, as is Bitcoin’s correlation with the gold market. This has resulted in the cryptocurrency moving alongside the broader financial markets, despite the decentralized nature of the digital asset.
The data shows that the correlation between the stock market and Bitcoin has remained stable at around 0.7 over the past month, showing a similar downward trend between April and June 2022 as it did then.
Behind The Bitcoin-Stock Market Correlation
For a long time, Bitcoin and the crypto market have been able to grow without much impact from stock market movements. However, that would change during the 2020 lockdown period, as companies have entered digital assets over the past two years, companies have bought tens of thousands of BTC to bolster their balance sheets, and Micro-Strategy alone owns over 130,000 BTC.
Given this, the performance of these companies in the stock market had started to spill above in Bitcoin. The stimulus payments also gave investors some “free” money to invest in the markets, leading to the inevitable simultaneous pumping of both markets, and the move from corporates to crypto only helps drive correlation.
At least in the short-term, this means it’s important for Bitcoin investors to keep an eye on the macro markets. Second FOMC hike. If the FOMC goes the CPI data release route, investors should brace for another fall.