Crypto Regulation Takes Toll on Bitcoin Correlation with Stocks

• The Nasdaq is up 10% in the last month as stocks have surged off softer forecasts around interest rates and the macro climate.
• Bitcoin is down 9% in the same time frame, the US regulatory crackdown spreading fear about crypto’s future in the country.
• Bitcoin’s correlation with stocks has dropped to its lowest point since 2018, surpassing what was seen in November 2022 amid the FTX collapse.

Bitcoin Correlation With Stocks at 5-Year Low

The Fed’s Rate Hike Pause

The US Federal Reserve this week paused its rate hiking policy after ten consecutive hikes. The move was nearly unanimously anticipated by the market, although over the past month markets have been flying. The S&P 500 is up 6%, while the Nasdaq is up 10%.

Bitcoin Price Drops

However, something is being left behind: Bitcoin. It is now trading below $25,000 for the first time in three months. In March a deep dive into its underlying price movement showed how tightly it trades with stock market movements. But two episodes jump out: firstly November 2022 when Bitcoin fell and Nasdaq surged; secondly this past month when correlation between Bitcoin and Nasdaq dropped to a five-year low.

November 2022 Episode

In November 2022 there was a break in correlation between Bitcoin and stocks that surpassed what was seen during FTX collapse when Bitcoin fell to $15,000 while stocks increased off positive inflation readings.

US Regulatory Crackdown

The current downturn of Bitcoin’s price may be attributed to US regulatory crackdown spreading fear about crypto’s future in the country.

Conclusion

It appears that overall correlation between stock and cryptocurrency markets may be weakening as both markets diverge from each other based on different economic drivers, with investors viewing them as separate asset classes rather than one correlated asset class like before Novmeber 2022 episode..