In 2022, the Bitcoin-macro market correlation reached new heights. As a result, the Bitcoin price and, by extension, the whole crypto market, closely tracked the movements in the stock and equity markets. Although predictions were made that cryptocurrency would start to separate from the macro markets over time, data still shows that there is a high correlation.
Follow The Macro Market
One of most notable ways in which the micro market and bitcoin correlation shine through is during major events, such as CPI data releases. CPI data releases have always been accompanied by higher than expected rates. The crypto market quickly responded to this release. Looking at bitcoin alone, it would’ve been normal to deduce that the market was reacting independently, but it had, in fact, followed the movement of the macro market.
At the moment, there is a high correlation between Bitcoin and the macro markets. The bitcoin correlation also to the gold market sits at near multi-year heights. Despite the fact that cryptocurrency is decentralized, this has led to the currency moving in sync with other financial markets.
Source: Arcane Research| Source: Arcane Research
The data shows that bitcoin and the equity market have had a steady correlation of around 0.7 over the past month. This is similar to the trend from April 2022 through June 2022. If the past is repeatable, there may be some relief as the correlation might decline much like back in April 2022.
What’s Behind the Bitcoin-Stock Market Correlation
Bitcoin and the cryptocurrency market have been growing steadily for the longest time without any major impact from stock market movements. This would change in 2020 as the lockdown period began and businesses could begin to invest in the digital asset.
BTC falling to the low $19,000s| Source: BTCUSD on TradingView.com
In the two-year period, many companies bought thousands of BTC in order to boost their financials. MicroStrategy holds more than 130,000 BTC. This led to the rise in bitcoin’s performance as a result of the companies that had been performing well on the stock exchange. The stimulus payments also gave investors some ‘free’ money to put into the markets, which led to the inevitable pump of both markets at the same time, and the crossover of companies into crypto only help to push the correlation further.
This means that bitcoin investors need to keep an eye on macro markets for the near term. Last week’s decline was due to the fact that the macro markets adjusted price for the November 2nd FOMC increase. Investors should be prepared for another price decline if the FOMC follows the CPI data release.
Featured image taken from Forbes.
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