After the US Federal Reserve’s decision to pause interest rate hikes this week, the stock market has been on the rise over the past month. The S&P 500 and Nasdaq have both risen 6% and 10%, respectively, in the last 30 days. Despite this, Bitcoin has fallen 9% in the same timeframe.
Our Head of Research, Dan Ashmore, has analysed the underlying price movement of Bitcoin and it’s relationship with the stock market. He has found that the correlation between Bitcoin and the Nasdaq is at its lowest point since 2018. This marks a clear departure from what we would expect, with the 60-Day Pearson currently sitting at -0.66, surpassing the lowest point in November 2022 at -0.49.
The main reason for this is the great regulatory crackdown in the US, which has spread fear about crypto’s future in the country. Companies such as Binance, Coinbase, eToro, and Robinhood have all been affected by the regulatory laws, leading to a drop in liquidity.
It is not yet clear if Bitcoin will be able to weather this storm long-term, but it is clear that the crypto industry faces a massive problem as long as lawmakers continue to turn the screw. It is not hyperbole to say that this is the most out of whack Bitcoin’s correlation has ever been while trading as a mainstream financial asset.
Ultimately, this is not how investors hoped a decoupling would come, but it goes to show the detrimental effect of the regulatory woes on the cryptocurrency industry.
