Bitcoin’s Correlation with U.S. Equities and Ether Weakens, Hits $92,000 Mark

Bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, continues its impressive rally, consolidating around $92,000—a stunning 115% increase year-to-date. Simultaneously, the total cryptocurrency market has soared to a record-breaking $3.025 trillion, according to TradingView’s TOTAL metric.

Despite this growth, Bitcoin’s correlation with traditional risk-on assets, such as U.S. equities, is showing signs of weakening. Renowned analyst Van Straten points out that in 2024, Bitcoin and the Nasdaq Composite moved in tandem on only 52% of trading days, a significant drop compared to previous years.

Bitcoin's Diverging Correlation with Nasdaq

Historically, Bitcoin has maintained periods of strong correlation with U.S. equities, particularly the Nasdaq Composite. During the bull runs of 2021 and 2022, Bitcoin and the Nasdaq often moved in lockstep, with their 30-day correlation hitting 1:1 at times. However, 2024 has marked a turning point.

Earlier this year, Bitcoin broke its previous all-time high, surpassing $73,000 in March. Since then, its price consolidated in a range between $50,000 and $70,000 until November, when Donald Trump’s U.S. presidential election victory sparked a renewed surge in Bitcoin’s price, pushing it beyond $93,000.

While Bitcoin continues its upward trajectory, the Nasdaq has struggled, retreating 4% from its all-time highs, compared to Bitcoin’s mere 1.5% dip. The current 30-day correlation between the two assets stands at 0.46, one of the lowest levels in five years, with September even seeing a negative correlation of nearly -0.50.

Bitcoin's Long-Term Independence

Van Straten suggests that Bitcoin’s divergence from traditional risk-on assets like equities could signal its maturation as an asset class. Fidelity data shows Bitcoin leading major asset classes in terms of risk-adjusted returns over the past five years, as measured by the Sharpe ratio.

Moreover, Bitcoin’s correlation with the S&P 500 remains low at just 19%. These metrics imply that while Bitcoin may align with risk-on assets during certain periods, it is gradually carving out its identity as a distinct investment class, especially as it climbs to become the seventh-largest asset by market capitalization.

Ether and Bitcoin Correlation Weakens

The weakening correlation isn’t limited to equities. Bitcoin and Ether (ETH), the two largest cryptocurrencies, have also started to decouple. Since 2019, the two assets often shared a near 1:1 correlation, except during Ether’s outperformance in the 2021 bull market. However, their 30-day rolling correlation has now dropped to 0.35, the second-lowest level on record.

Analysts attribute this divergence to growing market sophistication and a better understanding of the unique characteristics of Bitcoin and Ether. While their prices may still move in tandem during certain market conditions, long-term trends suggest a gradual decoupling as both assets establish independent market narratives.

What Lies Ahead

As Bitcoin cements its position as a significant global asset, its decreasing correlation with equities and Ether highlights its evolving role in financial markets. With a current price near $92,000 and a market cap that continues to grow, Bitcoin is poised to trade increasingly independently as investor confidence and understanding deepen.