The strong historical relationship between Bitcoin spot price and US stock indices is gradually diminishing, according to insights by crypto analytics firm Block Scholes.
Throughout this year, the correlation between Bitcoin (BTC) and mainstream equities, specifically the S&P 500 and the Nasdaq 100 has been on a steady decline since February and it is now at a ‘near-zero’ statistical relationship.
It has now reached the lowest level observed since July 2021, a period when BTC was positioned between its two prominent peaks in April and November.
Per the report, the decrease in correlation coincides with the recovery of both BTC and the equity market from the losses experienced during the tightening cycle of the previous year.
CoinMetrics chart confirms diminished correlation
The CoinMetrics correlation chart comparing Bitcoin and the S&P 500 reveals a significant decrease in their correlation, nearing zero. This correlation is measured using the Pearson correlation coefficient, which ranges from -1 to 1. A coefficient closer to 1 indicates a strong positive correlation, while a value closer to -1 suggests a strong negative correlation. A correlation of 0 indicates no relationship between the assets.
The line chart below clearly illustrates the current trend, showing that the correlation between Bitcoin and the S&P 500 is now approaching zero.
Changing landscape
The breakaway from historical US stock correlation is perceived by many as a sign of market maturity for the relatively new asset class. Additionally, the rise of a diverse set of investors and stakeholders with varied motivations and risk appetites further indicates the growing maturity of Bitcoin.
This class of new investors are the world’s largest fund managers who have developed renewed interest in the leading cryptocurrency in recent weeks.
Blackrock Inc, Wisdom Tree, Invesco and Fidelity Investments have all resubmitted their applications for a spot Bitcoin ETF after the SEC claimed there were some ‘inadequacies’ in their first applications. It is now looking more likely than ever that the first spot Bitcoin ETF will be approved. This will further open the door for more people to gain exposure to the digital asset through regulated institutional entities.
Although the wait is still on, early dividends of institutional interest are already evident. The latest Digital Asset Fund Flows Weekly Report by European digital asset manager CoinShares showed that digital asset investments recorded inflow of $125million for the week, with Bitcoin accounting for 98% of it.
