Bitcoin and Its Growing Correlation
Bitcoin, once perceived as a unique, uncorrelated asset, is increasingly showing a growing correlation with other speculative investments, especially high-tech stocks. This phenomenon has become particularly noticeable during the latest tightening cycle of the U.S. Federal Reserve’s monetary policy, where rising interest rates significantly impacted risk appetite among investors.
Correlation with Nasdaq 100
Since the beginning of 2024, there has been a significant correlation between Bitcoin and the high-tech Nasdaq 100 index. The 90-day correlation coefficient has reached 0.46, the highest level since late August. For comparison, after the Fed began raising interest rates in 2022, the correlation exceeded 0.8, indicating Bitcoin’s high sensitivity to macroeconomic factors.
Optimism about Rate Cuts
Amid growing optimism regarding a potential Fed rate cut, Bitcoin is once again attracting investors’ attention. Expectations that lower borrowing costs will increase demand for riskier assets have contributed to the recent rise in cryptocurrency prices. On Friday, Bitcoin traded around $66,200, up 1.4% from the previous day, with a weekly gain of nearly 10%.
Impact of ETFs on the Cryptocurrency Market
The approval of exchange-traded funds (ETFs) in the U.S. to directly hold Bitcoin has had a significant impact on the market. The launch of such ETFs in January 2024 led to a record surge in Bitcoin, reaching nearly $74,000 in March. This move opened Bitcoin to a new class of investors, boosting demand and increasing the cryptocurrency’s liquidity.
Changing Paradigm
Historically, Bitcoin has been positioned as digital gold and a hedge against inflation. However, its high volatility and recent correlation with stocks undermine these claims. In 2024, Bitcoin demonstrated a 58% increase, significantly outpacing the Nasdaq 100 index’s 11% growth. This dynamic calls into question its role as a safe haven and highlights its resemblance to other high-risk assets.
Looking to the Future
It will be interesting to observe how Bitcoin behaves amid a potential Fed rate cut. Will it continue to move in sync with high-tech stocks, or will it start to emerge as an alternative asset independent of traditional markets? Analysts and investors are closely watching these changes, trying to predict the future of the largest cryptocurrency.
As Bitcoin continues its evolution, it is increasingly integrating into the global financial system. Whether it can remain a unique asset or its fate will be closely tied to other speculative investments, only time will tell.
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