Bitcoin Is Showing Signs of Less Stock Market Correlation

Bitcoin's correlation to the stock market could finally be dissolving as 2022 comes to a close. The leading cryptocurrency has been experiencing less volatility these days compared to the fluctuations of the stock market.

For most of the year, bitcoin has been having to fight the same downward pressure that's been affecting both the stock and bond markets. As central banks around the globe look to tighten monetary policy in order to keep inflation in check, it's been producing a heavy dose of downward volatility that's keeping investors on the sidelines when it comes to traditional assets.

That same pressure has also been affecting bitcoin, which is ideally an uncorrelated asset when juxtaposed with the traditional financial markets. However, as markets look to try to recover in the fourth quarter, bitcoin has remained relatively sedate in comparison.

“Crypto markets continue their slumber with little progress either way,” said Richard Usher, head of OTC trading at the BCB Group. “Until broad risk bounces, this sector won’t.”

Heading into the final quarter, bitcoin pushed above the $20,000 level amid a stock market rally, but has fallen below and back above the $19,000 price level as of late. As the stock market has been rallying, the leading cryptocurrency has been re-establishing its non-correlation to equities.

“The price of bitcoin is maintaining the $19,000 level, but with the FOMC’s minutes and CPI ahead this week, the market will likely refrain from taking risks, which in turn will likely put pressure on bitcoin,” said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitban.

More Institutional Adoption

Prospective bitcoin investors looking for a sign of bullishness can look to more institutional adoption as traditional market players look to add more digital currencies amid the 2022 slump. It could be an opportune time for these large investors to pour heavy doses of capital into cryptocurrencies while prices are still depressed.

“These large companies believe in the potential of digital assets and Web3,” said Owen Lau, an analyst at Oppenheimer. “It takes time to build, but these companies are taking a long-term view to bulk up their capabilities to make sure they won’t be behind in 3-5 years.”

The latest price declines in 2022 may be producing more skeptics in bitcoin investing. However, there’s an alternate solution via bitcoin futures.

Investors who want to get bitcoin exposure while avoiding investing via a cryptocurrency exchange can opt for the ProShares Bitcoin ETF (BITO). The fund provides exposure to bitcoin futures, tailing the price movements of the leading cryptocurrency on a normal market exchange.

Furthermore, the fund is actively managed, giving investors the peace of mind of knowing that their investment is in the hands of seasoned portfolio managers. Bitcoin can be a volatile asset, and active management can make portfolio changes on the fly when market conditions warrant an adjustment.

BITO has also been staying in lockstep withbitcoin pricesso investors don’t have to worry if the fund will deviate from the cryptocurrency’s price movements. BITO provides this tactical exposure while staying within the regulatory framework of the traditional financial market, adding to its potential safety.

For more news, information, and strategy, visit the Crypto Channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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