Analyst James V. Straten recently shared a finding on Reddit on July 21 which suggests that Bitcoin is a distinct asset class, not exhibiting significant correlations with equities and other traditional trading instruments. The study’s results determined that Bitcoin is largely correlated with Ethereum at 0.70, but diverges with gold at -0.12 and has a weak correlation with the S&P 500 at -0.05.
It appears that Bitcoin has its own independent nature, meaning its performance may not be greatly impacted by the volatility of other markets, such as stocks and precious metals. This could make Bitcoin a desirable investment option for portfolio diversification.
Recent developments in the crypto sphere could further reduce the correlation between Bitcoin and equities. Major financial institutions such as BlackRock and Fidelity have filed for a spot Bitcoin ETF, sparking investor interest in the asset. Although the SEC has yet to approve the ETF, the community remains optimistic.
In the long-term, Bitcoin is expected to remain positive due to increasing adoption and its deflationary nature. In Q2 2024, the Bitcoin network will reduce miner rewards by half, increasing the coin’s scarcity.
Ultimately, Bitcoin is proving to be a distinct asset class, and its reduced correlation with traditional markets make it an attractive investment option for portfolio diversification.
