Bitcoin (BTC) has demonstrated a remarkable decoupling from traditional sentiment in US stock markets. The 90-day rolling correlation between Bitcoin’s spot price and the tech-heavy Nasdaq index, as well as the broader S&P 500 index, has plummeted to its lowest level in two years. This shift indicates a growing independence of Bitcoin’s fortunes from traditional market factors.
According to Andrew Melville, research analyst at BlockScholes, “The fall in correlation has happened as both assets have retraced losses sustained throughout last year’s tightening cycle.” This suggests that as Bitcoin and traditional assets recover from the economic downturn, their paths diverge, indicating the maturing nature of the cryptocurrency market.
The recent filing of Bitcoin exchange-traded funds (ETFs) by prominent financial institutions like BlackRock, Fidelity, WisdomTree, VanEck, and Invesco has injected renewed optimism into the crypto market. Since BlackRock’s filing on June 15, Bitcoin has surged by 25%, defying the range-bound activity observed in US stock indices. Ilan Solot, co-head of digital assets at Marex Solutions, outlines the three phases of the ETF narrative: frontrunning the launch, post-launch flows, and validation of crypto as an asset class.
The increasing investor interest in exchange-traded products has been evident since June 15, with Bitcoin ETPs globally experiencing inflows of 13,822 BTC in June alone. Vetle Lunde, senior research analyst at K33, highlights that these inflows have been strong across jurisdictions, including Canadian and European spot ETPs and US futures ETFs. This growing appetite for crypto-related investment products further emphasizes the shifting dynamics of the market.
Interestingly, the correlation between Bitcoin and the top US stocks tracked by the Nasdaq 100 index has also dropped to its lowest level in nearly three years. Throughout June, the correlation between Bitcoin and the Nasdaq 100 stood at a mere 3%, diverging significantly from the average correlation of 60% observed in 2022. This decoupling can be attributed to Bitcoin’s outperformance of the broader tech index, recording gains of almost 14% compared to a mere 3% for the Nasdaq 100.
The surge in Bitcoin’s price played a pivotal role in this decoupling phenomenon. After a dip below $25,000 due to regulatory concerns in the US, Bitcoin witnessed a strong recovery following BlackRock’s ETF application. Other major financial institutions quickly followed suit with their own filings, fostering increased optimism regarding institutional adoption of cryptocurrencies. This positive sentiment pushed Bitcoin above $30,000 for the second time this year.
Moreover, data from blockchain analytics firm Glassnode indicates that long-term Bitcoin investors took advantage of the price dip in May to accumulate more tokens. The Long-term Holder Net Position Change indicator revealed that net accumulation has occurred at the fastest pace since October 2021, as BTC entered or exited exchange wallets known for holding coins for over six months.
This decoupling of Bitcoin from US stock markets and the surging interest in ETFs signify a transformative period for the cryptocurrency sector. Bitcoin is increasingly seen as a distinct asset class with its own unique drivers, rather than being solely influenced by traditional market sentiment. As investors and institutions continue to explore and embrace digital assets, the future trajectory of Bitcoin and the wider crypto market appears to be shaped by its own evolving dynamics.