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The Bitcoin Stock Market Correlation

Feb 10, 2023
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The cryptocurrency market in the last few years has been loosely dependent on the performance of its golden egg— Bitcoin. Many cryptocurrency traders and analysts have found a way to tie the performance of some altcoins to Satochi’s ingenious token and have managed to consistently predict market outcomes correctly.

In market analysis, this can be defined as market correlation. This phenomenon explains how certain assets perform in relation to one another. A prime example is the movement of stocks in the same industry, stocks in the same sector will oftentimes end up moving in the same trajectory mainly because they are confined and defined by the same factors and are related to one another.

Crypto Market Correlation Analogies

Let’s say there was a shortage of milk in town, all the ice cream stores would be indeed affected because they run the same business. In fact, all businesses that need a supply of milk would be affected too.

A not-so-financial example is the correlation between height and weight. Tall people are likely to weigh more and vice versa. The idea is that a correlation between two (or sometimes more) assets makes it possible to predict the performance of one of the assets once you understand the other pair.

This seems relatively easy when you have assets that are in the same financial sector or are obviously related. However, when it comes to assets that don’t seem to be linked in any way, the correlation becomes much more complex.

Let’s use our ice cream example to buttress the point. If there’s a shortage of milk, it would affect the production of ice cream in one way or the other— that’d be rather obvious. But what if the correlation was not between milk and ice cream?

What if the correlation was between milk and honey? They don’t seem to be related in any way right? However, in financial markets, we see a lot of correlating pairs that seem to be dependent on each other even though they are unrelated.

A prime example in recent times is the Bitcoin correlation to the stock market which we will be discussing in this article. Let’s dive in.

Is There a Bitcoin Correlation to the Stock Market?

At this point, you’re wondering “How does Bitcoin relate to stock market assets?” Well, the Bitcoin and stock market correlation has been on the radar of financial analysts for some time now. We saw a more intense spike in interest when both Bitcoin and Nasdaq prices dropped to a record all-time low in December 2018.

Since then, there have been numerous other significantly correlating incidents. Some examples include:

    June 2019 sharp peak in Bitcoin and Nasdaq prices
    Record highs for both Bitcoin and Nasdaq followed by rapid plunges in February 2020
    The March 2021 price hike experienced by both Bitcoin and Nasdaq
    Bitcoin seems to be mirroring even the smallest of Nasdaq movements by May 2022.

Some analysts maintain that these major incidents are just well-timed coincidences. However, there are too many occurrences for these to be described as a coincidence.

The correlation of Bitcoin to the stock market is as unprecedented as it is obvious. Satoshi’s primary reason for inventing Bitcoin was to create a financial system independent of all formerly established systems.

The relatively recent correlation of Bitcoin to the stock market seems to defeat that purpose. To compound matters even further, other cryptocurrencies tend to be driven by the performance of Bitcoin. This means there’s now a correlation between crypto and stock market assets.

Bitcoin VS Stock Market— Chart History

The crypto market correlation might not seem obvious until we explore the chart history of the Bitcoin correlation to stock market assets. That’s exactly what we are going to do in this section.

Comparing the two markets, in the last year, we see that the mirroring of Bitcoin and the two have slowly become more and more obvious. At first, the price hikes in November and December of 2021 seem to be abrupt and nonuniform.

However, by the time we follow the trajectory of the chart down to June 2022, we start to see a more uniform and coordinated Bitcoin correlation to the stock market.

This mirroring has over the last six to eight months been consistent as seen in the chart below. Running from the central area of the chart to the bottom right corner.

Market chart comparing Bitcoin to the Nasdaq100 in the last year— (Source: TradingView)

The breakdown of this chart shows more proof of asset correlation to the market and Bitcoin. Further insight and in-depth analysis of the crypto stock market correlation are available when you consult with the market-making team at

The team specializes in analyzing, building, and implementing high-demand solutions to earn profits for clients after market reassessment with the aid of trading tools.

Factors That Affect the Correlation Between Bitcoin and Stock Market

The correlation between Bitcoin and the stock market is not exactly a predictable event. It comes with numerous unfounded relationships that somehow seem to end up making them correlate.

There are a few factors that directly affect the overall price of both markets and influence their trajectory. Some of these factors are shared between the two while some affect only one of the pair. Below is a table showing factors that affect the stock and cryptocurrency market.

Factors Affecting The Stock and Cryptocurrency Markets

Factors Stock Market Bitcoin & Cryptocurrencies
Supply & Demand
Economic Conditions
Investors’ Predictions
Media & News
Regulatory policies
Monetary policies
Stock Issuer Health Χ
Geopolitics Χ
Mining costs Χ
Competition among tokens Χ
Network Development Χ

Next we will discuss these factors in three segments. We will explore factors affecting both markets, Bitcoin alone, and the stock market alone.

Factors Affecting Both Markets

  • Supply and DemandThe supply and demand of assets always tend to affect their prices. It is the same for both equity assets and the cryptocurrency market.A slight difference, however, is that the supply of most cryptocurrencies is fixed, giving investors a predictive edge when it comes to crypto.
  • Economic ConditionsThe condition of the economy is another primary factor that affects the prices of Bitcoin and the stock market. In fact, a prime example is the September 2021 adoption of Bitcoin byEl Salvadorwhich didn’t go so well and contributed slightly to the price drop at the time.The stock market is also affected by economic conditions such as inflation and GDP growth.
  • Investors’ PredictionsInvestors use predictions and analysis to determine whether or not to buy an asset. This principle applies to both the stock and crypto markets. At the end of the day, assets that don’t show promise via predictions are left behind. This in turn causes fluctuations in prices.
  • Media and NewsThe media, in its little way, can affect the prices of both the stock and crypto market. For crypto, Twitter is a primary source of information for traders and analysts. With many accounts giving updates on whaling and pump-and-dumps.News has always affected equities and stocks as traders are always on edge, looking to follow favorable markets.
  • Regulatory PoliciesPolicies that are aimed at regulating financial markets are put in place to mitigate scams and illegal dealings. These policies are more comprehensive in the stock market but there is a slow increase in crypto regulation too. These regulations always impact the prices on the market as investors tend to shy away from any form of restrictions. An example is thecrypto mining regulation in Chinathat affected Bitcoin prices in May 2021.
  • Monetary PoliciesPolicies set up by a nation’s financial body to control and regulate supply are called monetary policies. They are put in place to foster economic growth by controlling the availability of money.These policies always affect non-fiat investments because investors are loosely controlled by the availability of their country's currency.

Factors Affecting Bitcoin and Cryptocurrencies

  • Mining CostBitcoin is one of the most mining-intensive cryptocurrencies in the world. Its value goes up due to the competitive nature of its mining process. As more miners join the force, more sophisticated equipment is needed to mine. At the end of the day, this process affects the overall price of the token. This is the same principle that all mining-intensive cryptocurrencies follow.
  • Competition among tokensThe crypto market is a highly competitive one. There are an estimated 100 new cryptocurrencies listed every day according to theNew York Times. These tokens in their small way affect the fluctuations in the market.Other external factors such as crypto projects partnering with exchanges and other regular incentives make it a highly competitive market.
  • Network developmentWhen there are new developments in a cryptocurrency’s network there are bound to be price fluctuations. Investors will tend to move to a more promising network or try out a new option. A great example is theEthereum hard forkof September 2022 that caused unexpected price fluctuations.

Factors Affecting The Stock Market

  • Geopolitics A major area that strongly affects the stock market is geopolitics. The political landscape of a geographic region tends to affect assets that have ties with that region. For instance, the recentRussia-Ukraine conflicthas seen prices of oil and gas go up as the conflict slowly introduces a scarcity of petroleum-related products.
  • Financial Stock issuer healthThe financial health of stock issuers usually affects the issuance of stock assets and in turn might lead to price fluctuations. The fluctuations might not make a strong difference but they can affect individual traders to a large extent.

Bitcoin Decoupling

Decoupling is a term that describes the predicted separation of a pair of formerly correlating assets. In layman's terms, we could liken it to a divorce. Asset pairs that mirror each other or are related in any way will at some point separate.

Most times members of the pair end up correlating with other assets and other times, the pair comes back together after a while. This is a common phenomenon in market analysis.

When we talk about Bitcoin decoupling, we will be referring to a predicted separation of Bitcoin from its correlation with the stock market. From a technical point of view, it is the point at which the correlation between Bitcoin and the stock market is negative.

Analysts predict that this decoupling will occur soon. Estimates from crypto enthusiasts expect Bitcoin to rise as high as $1M per coin with the other commodities in the stock market crashing to record lows.

However, there’s a possibility of the opposite happening. Bitcoin could go even much lower than its present value with traditional assets starting to rise in value.

Frequently Asked Questions (FAQs)

Is Bitcoin Correlated to the Stock Market?

Yes, Bitcoin has been proven to be correlated to the stock market. However, analysts expect an asset decoupling to occur soon.

What’s Causing the Bitcoin Stock Market Correlation?

There are many factors causing the Bitcoin correlation to the stock market. However, a major influence is that investors now see Bitcoin as a more traditional form of investment as opposed to an alternative investment.

What is Better to Invest in Bitcoin or Stocks?

Both Bitcoin and stocks have amazing potential to bring investors high returns. However, cryptocurrencies like Bitcoin are highly volatile and too unpredictable. If you’re just starting out, you should start by investing in the stock market as it is safer. If you want to diversify your portfolio, adding Bitcoin and other cryptocurrencies is a good idea.

Will Bitcoin Decouple From the Stock Market?

Yes, analysts have predicted that Bitcoin will decouple from the stock market after a short while.

Does Bitcoin Stop Like the Stock Market?

No, Bitcoin doesn’t stop trading, unlike the stock market, it doesn’t have any trading hours.