Bitcoin’s Correlation with European Stock Markets and NASDAQ Falls to Two-Year Low

According to reports, data shows that the 30-day correlation between Bitcoin and European stock markets has fallen below – 0.2, the lowest level in more than two years. In addition, the 30-day correlation between Bitcoin and NASDAQ has fallen to about 0.2, the second lowest level in more than a year (previously below 0.2 in November 2022).

Data: The 30-day correlation between Bitcoin and European stocks fell below – 0.2, hitting a two-year low

Cryptocurrency has long been a trending topic in the world of finance, but it’s not just the price of Bitcoin that people are keeping an eye on. Recent data indicates that the correlation between Bitcoin and European stock markets has reached its lowest level in over two years, with a 30-day correlation below -0.2. Alongside this is the 30-day correlation between Bitcoin and NASDAQ, which has fallen to around 0.2, marking the second lowest level in over a year, with the previous level below 0.2 observed in November 2022.

The Link Between Bitcoin and the Stock Market

For quite some time, traditional stock markets and cryptocurrencies were viewed as two completely separate entities. However, as we have witnessed in recent years, this notion is simply not true. Cryptocurrencies, especially Bitcoin, have gained significant mainstream attention as a result of their impressive growth and increasingly widespread adoption. As a result, more investors are investing in Bitcoin and other cryptocurrencies, increasing the correlation between Bitcoin value and stock market indices.

Understanding Correlation

When we talk about correlation, we’re referring to how two entities are related to one another. In economics, correlation is a statistical measure that accounts for how closely the price of one asset is related to the price of another asset over a specific period. A high correlation indicates that the two assets move in tandem, while a low correlation indicates the opposite. The correlation between Bitcoin and stock markets is an essential factor for investors since it shows whether their investments are closely or loosely tied to stock market fluctuations.

The Current State of Bitcoin Correlation with European Stock Markets

Data shows that Bitcoin has always had a weak correlation with European stock markets, which is not surprising given that Bitcoin is a decentralized form of currency, and the stock market is heavily influenced by traditional institutions. The current 30-day correlation between Bitcoin and European stock markets indicates a decline, with a correlation below -0.2 (the lowest level witnessed in over two years).
This decrease in correlation could indicate that as Bitcoin becomes more mainstream, its correlation with traditional financial markets may weaken. It also suggests that the factors influencing Bitcoin’s price change could be more individualistic and dependent on its characteristics rather than those of the stock market.

The Current State of Bitcoin Correlation with NASDAQ

NASDAQ is the world’s second-largest stock exchange and is also home to some of the market’s most innovative technological companies. As a result, the recent drop in the 30-day correlation between Bitcoin and NASDAQ suggests that Bitcoin’s strong correlation with the technology industry is weakening, which may imply that people are investing less in Bitcoin based on its significance in the technology industry.

The Future of Bitcoin’s Correlation with Stock Markets

It’s challenging to predict the future of Bitcoin’s correlation with stock markets. Still, these recent data insights suggest Bitcoin may well be taking on a more individualistic identity in the investment world. If this is the case, it may be a good sign for those worried about Bitcoin’s potential impact on the stock market. While Bitcoin remains a relatively unstable investment due to its decentralized status and ongoing association with illegal activities, the lowered correlation between Bitcoin and the stock market could potentially mitigate the risk of volatility.

Conclusion

Bitcoin has always been considered an alternative investment to traditional financial institutions. While Bitcoin’s lack of market regulation is often cited as one of the reasons for it being such a volatile investment, it also helps to create a potential for more individualistic pricing. The recent drop in Bitcoin’s correlation with both European stock markets and NASDAQ suggests that the cryptocurrency may be growing structurally independent of the stock market. Now investors can see why cryptocurrencies stand out as an exciting type of investment that can’t easily be compared with a stock.

FAQs

1. What is correlation in finance?
In finance, correlation refers to the statistical relationship between two assets. Correlation is used to determine if two assets move in tandem with each other over time.
2. What is the significance of Bitcoin’s correlation with European stock markets and NASDAQ?
Bitcoin’s correlation with European stock markets and NASDAQ indicates how closely Bitcoin’s value is related to the traditional financial markets. A high correlation means that Bitcoin’s value fluctuates according to the stock market, while a low correlation indicates less relation between the two investments.
3. What does the recent drop in correlation between Bitcoin and NASDAQ mean for investors?
The recent drop in the correlation between Bitcoin and NASDAQ suggests that Bitcoin’s connection to the technology industry is becoming increasingly weaker. It may imply that people are beginning to withdraw their investments from Bitcoin due to its lack of significance in the technology industry.