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Charles Edwards, the founder of the Capriole Fund, revealed that Bitcoin will decouple from stocks and will likely outperform them. However, arcane research recently reported that Bitcoin is still firmly following the stock market.
Correlation Between Bitcoin and Stock Market
According to COINBASE Institute Research, the crypto market and traditional financial market became increasingly correlated in 2020. Since the start of the pandemic, the crypto market saw exponential growth. During this time, it also became increasingly intertwined with the stock market.
According to Coinbase Research, the crypto assets share a very similar risk profile to oil and technology stocks. Bitcoin and Ethereum went from not being correlated with the stock market in 2019 to being strongly correlated in 2022, having a beta of 2. Beta is a measure of how strongly an asset is coupled with the stock market.
A beta of 2 means that when the stock market rises or falls, Bitcoin and Ethereum rise or fall by twice as much. Arcane research pointed out that while the tech-oriented NASDAQ fell by 22%, BTC dropped by 51% during the same period.
Coinbase Research attributed two-thirds of the crypto prices fall during the bear market to larger macro-economic conditions. Only one-third of the fall was due to issues in the crypto industry.
