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Study: Bitcoin the S&P 500 Are [Still] Not Significantly Correlated

For years, there have been daily debates on the correlation that exists between the Bitcoin market and the traditional stock market like the S&P 500.

Bitcoin/stock market correlation in March

The correlation between the two markets was reported to have shot up to historic high levels during the massive sell-off of March 12. This was noticed after the global stock markets and the cryptocurrency market had both experiences massive losses in a single day.

After the unfortunate event, which many rumoured was caused by the COVID-19 pandemic, the correlation then decreased back to relatively normal levels at the end of March. This left Bitcoin with an uncertain and insignificant correlation with S&P 500 to date since analysis about the theory is always lacking, according to a new study by crypto market data provider, Coinmetrics. 

In its latest edition of the “State of the Network” report, Coinmetrics explained the method it adopted in conducting the correlation analysis between Bitcoin and the traditional stock market. 

“To calculate the correlations in this report, we first took the natural log returns for each asset and then calculated rolling Pearson correlations over specified periods. We analyzed end of day correlations using New York close pricing (4:00 PM EDT) over a 250-day rolling time window. We also looked at intraday correlations by looking at 5-minute returns over a 60 hour rolling time window.”

Coinmetrics further said they had to cut out Bitcoin results from the days/hours when equity markets are closed. This was done this way because the cryptocurrency market never closes, unlike the stock markets that close during the weekends and midnight.

This moved helped to remove some noise, but the downsides are that it sometimes creates exaggerated correlations around the opening/closing of each market, the cryptocurrency data provider added.

Bitcoin true correlation remains difficult

According to Coinmetrics, analyzing Bitcoin’s true correlation against the stock market as a whole is a difficult task since the traditional market is large and complex. However, the report further suggests that Bitcoin and S&P 500 correlation has suddenly increased to new all-time highs over the last month.

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