Bitcoin has become a macro asset with a significant relationship to traditional indices like the S&P 500 and the Nasdaq Composite. These indices are crucial pillars of the traditional financial system, with the SPX reflecting broader market trends and Nasdaq representing a tech-heavy benchmark tied to growth sectors and innovation. By monitoring Bitcoin’s interactions with these indices, we can determine whether it behaves more as a risk-on asset correlated to equities or as a hedge decoupling during times of uncertainty.
Changes in Bitcoin’s correlation with traditional assets indicate shifts in market perception. A strong positive correlation suggests Bitcoin is moving in sync with equities, possibly as a speculative asset linked to risk-on behavior. Conversely, a weakening or negative correlation signifies Bitcoin is being viewed as a hedge, similar to gold, against macroeconomic uncertainty, inflation, or geopolitical risks. These shifts offer valuable context for understanding Bitcoin’s price movements in the market.
In the past three months, Bitcoin has significantly outperformed both the SPX and Nasdaq, with gains of 58.79% compared to SPX’s 5.10% rise and Nasdaq’s 6.10% increase. This outperformance was particularly notable after the US presidential election when Bitcoin surged to an all-time high of over $93,000, leaving traditional indices behind. The correlation coefficients between Bitcoin and the indices fluctuated during this period, ultimately falling into weakly negative territory as Bitcoin moved independently of traditional equities.
The 1-month data also reveals Bitcoin’s significant outperformance, rising by 36.52% compared to SPX’s 0.99% gain and Nasdaq’s 1.72% increase. The post-election rally was a key driver of Bitcoin’s performance, driven by enthusiasm around its potential as a long-term investment and hedge against uncertainty. The correlation coefficients during this period further indicate Bitcoin’s growing independence from traditional markets, particularly during high-volatility events like the election.
Interestingly, Bitcoin’s correlation with Nasdaq was less negative than with SPX, potentially due to overlapping investor bases between Bitcoin and the tech sector. Both attract growth-oriented, risk-tolerant capital, which could explain this phenomenon. Overall, the trend shows that Bitcoin’s independence is increasing, signaling its emergence as a significant macro asset separate from traditional equities.
