Correlation Between Bitcoin and the S&P500 | Why 2020 Is a Fascinating Case Study for BTC
2020 has been a fascinating and challenging year for so many reasons. Bitcoin has been largely correlated to the S&P500 since the start of the year and there are a wide array of possible causes for this price action.
In this clip from episode #50 of the LeoFinance podcast, we talked about the correlation between BTC and the SP500 and how institutional money flowing into the space could be causing this relationship between U.S. equities and the BTC price.
As we see more institutional money flood the BTC & crypto space, we may see greater and greater degrees of correlation. I think many of us look at BTC as a non-correlated asset, but there are many reasons why we could see a close relationship in price going forward.
Another interesting thing about the relationship between Bitcoin and equity markets is the fact that BTC actually recovered faster than the equity markets and brought more gains to people who bought the asset.
While indicators may show us that BTC is closely correlated to the SP500 at the moment, we have to keep in mind how small BTC is compared to traditional equities. The relative “newness” and small market cap of Bitcoin is what can cause major volatility and thus, major profits and/or losses.
As Paul Tudor Jones mentioned recently: we’re seeing the birth of an entirely new asset class. The rules are continually changing and what we are witnessing is uncharted territory in terms of price discovery and adoption.
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