The Changing Correlation between Bitcoin and Global Macro Assets
I spent some time over the weekend looking at the correlation between Bitcoin and other global macro assets and here are some of the conclusions reached:
Bitcoin's correlation with the tech sector has steadily declined over the past few months; Bitcoin's correlation with gold has remained relatively stable over the past few months.
Since mid-March, the gap between Bitcoin's correlations with the technology sector and gold has been gradually decreasing. This phenomenon may be driven by Bitcoin's role as a safe-haven asset. That said, bitcoin is still slightly more correlated to the tech sector right now.
I calculated a 60-day rolling regression of bitcoin against gold and tech. r-values reflect the variance of bitcoin's correlation with gold and tech.
When the percentage of variance for global macro assets is small, it indicates that bitcoin is moving more 'special' because it has a low correlation.
Next are the events in the last five years where Bitcoin has had a correlation with macro markets:
- 2018-2019: Bitcoin trading behaves exceptionally as it is a smaller asset.
- 2020: Bitcoin shows correlations with technology, gold and crude oil
- 2021: Bitcoin shows weak correlation with global macro assets
- 2022: Bitcoin shows strong correlation to the technology sector
- 2023: To be determined
In general, as an asset's market capitalisation increases, the variance of its correlation with global macro assets also increases. Bitcoin's correlation variance is higher in 2023 than in 2020, and its market capitalisation has tripled.
Bitcoin's correlation with the tech sector has steadily declined over the past few months; Bitcoin's correlation with gold has remained relatively stable over the past few months.
Since mid-March, the gap between Bitcoin's correlations with the technology sector and gold has been gradually decreasing. This phenomenon may be driven by Bitcoin's role as a safe-haven asset. That said, bitcoin is still slightly more correlated to the tech sector right now.
I calculated a 60-day rolling regression of bitcoin against gold and tech. r-values reflect the variance of bitcoin's correlation with gold and tech.
When the percentage of variance for global macro assets is small, it indicates that bitcoin is moving more 'special' because it has a low correlation.
Next are the events in the last five years where Bitcoin has had a correlation with macro markets:
- 2018-2019: Bitcoin trading behaves exceptionally as it is a smaller asset.
- 2020: Bitcoin shows correlations with technology, gold and crude oil
- 2021: Bitcoin shows weak correlation with global macro assets
- 2022: Bitcoin shows strong correlation to the technology sector
- 2023: To be determined
In general, as an asset's market capitalisation increases, the variance of its correlation with global macro assets also increases. Bitcoin's correlation variance is higher in 2023 than in 2020, and its market capitalisation has tripled.