Correlation between bitcoin and S&P500 nears all time high

Correlation between the S&P 500 and bitcoin crested near an all-time high earlier this week, according to new data from Coin Metrics. On Monday, the Pearson 180-day correlation reached 0.4905 before a steep decline to 0.36 on Tuesday.

Source: Coin Metrics

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Correlation, expressed as a number between -1 and +1, indicates the type of relationship between assets. A positive number indicates that movement by one coincides with similar movement of the other, while a negative number indicates an inverse relationship. Numbers close to zero indicate little to no relationship.

Investors usually aim for low correlation between assets in their portfolios in order to limit volatility. A 0.49 correlation is considered moderate.

Monday's level came close to eclipsing the March 14 all-time high, when correlation reached 0.4999. That level coincided with the first week of market fallout from the coronavirus pandemic, with mass sell-offs driving the relationship. At that time, assets across Wall Street became increasingly correlated.

Before the recent spike in S&P correlation, the number had seen steady growth in the summer months before dipping to nearly zero in May.

About Author

Aislinn Keely is a reporter on The Block's policy team holding down the legal beat. She covers court decisions, bankruptcies, regulatory actions and other key moments in the legal sphere, putting them in context for the wider crypto industry. Before The Block, she lent her voice to the NPR affiliate WFUV and helmed Fordham University's student newspaper. Send tips or thoughts on all things policy and legal to [email protected] or follow her on Twitter for updates @AislinnKeely.