Last Thursday, the value of Bitcoin (BTC) declined sharply and lost more than 4 percent of its value in a matter of hours. Bitcoin (BTC) lost about $400 and traded close to the $6,200. As Bitcoin (BTC) was suffering that lost, the stocks market was also experiencing the same thing. This has left people wondering if it’s just a coincidence or the stock market actually have something in common with Bitcoin (BTC).
Analysts in the market have continually asked if Bitcoin (BTC) and the stocks are correlated. This is because there are lots of instances where Bitcoin (BTC) and stocks appear to have something in common. Over the past months, there are certain instances where Bitcoin (BTC) and stocks have moved in tandem.
Instances Where Stocks and Digital Currencies Moved in the Same Direction
Last year, both digital currencies and stocks saw a significant level of gains. They both saw new levels and attracted more investors. Earlier this year, when the two asset classes began their downward trends, it once again seemed that they were closely following each other.
Bitcoin (BTC) Price Today – BTC / USD
Sentiments can play a vital role in situations where both more novel assets (digital currencies) and more traditional assets (stocks) display significant correlations. These situations are usually fueled by events that seem very attractive and appealing to investors. Bringing them in their numbers to a particular type of asset.
According to the CEO of BitBull Capital – Joe DiPasquale, investors move in aggregate into the markets when they’re optimistic, digital or traditional. He said they tend to leave the market when positive sentiments are wearing off.
Bloomberg Data Compiled by Blockforce Capital Reveals a Weak Correlation between stocks and Bitcoin
The near-term analysis of Bitcoin (BTC) and stocks seems to prove that they have a strong correlation between them. However, that is not the case when the situation is observed from a wider lens. Bloomberg Data compiled by Blockforce Capital – an asset management firm based in the U.S. – revealed the long-term correlation between both assets.
According to the analysis by the firm, the long-term correlation between Bitcoin (BTC) and stocks is very weak. The analysis revealed that there has not been a substantial correlation between them. The analysis examined Bitcoin (BTC) and the S&P 500 Index from Jan. 2015 through 11 Oct. 2018. There has been an insignificant correlation between Bitcoin (BTC) and the S&P 500 historically.
There Might Be Correlation between Bitcoin (BTC) and Stocks down the Lane
According to Tim Enneking, Bitcoin (BTC) and stocks might have a correlation down the lane. He said as more traditional investors, with experience in assets such as bonds and stocks, enter the space, the situation would change. As more investors get involved with cryptocurrencies, it could increase the level of correlation between digital currencies and stocks.
Tim Enneking is the managing director of Digital Capital Management. He noted that one of the historical advantages of digital currency is that it has never correlated with fiat investment classes. He also added that digital currency would be a far less attractive investment if a correlation were to rise on a sustained level.