According to Coindesk: Bitcoin’s price rally to over $93,000 is reshaping its perceived relationship with traditional markets and other cryptocurrencies. Once considered a high-risk asset closely linked to U.S. equities, Bitcoin (BTC) is increasingly carving out its own identity in the investment landscape, as data reveals a weakening correlation with the Nasdaq and Ethereum (ETH).
Bitcoin and Nasdaq: Diverging Paths in 2024
In 2024, Bitcoin and the Nasdaq Composite moved in tandem on only 52% of trading days, according to Investing.com. This marks a sharp departure from previous years when the two assets frequently exhibited a near-perfect correlation, particularly in 2021 and 2022.
Since March 2024, the correlation between Bitcoin and the Nasdaq on a 30-day rolling basis dropped to 0.46, one of the lowest levels in five years. By September, it briefly turned negative at -0.50. While the Nasdaq has fallen 4% below its recent all-time high, Bitcoin continues its upward trajectory, now trading just 1.5% shy of its peak.
Institutional Demand and Bitcoin's Independent Momentum
Bitcoin’s implied volatility has declined significantly over the years, now sitting at around 60%, down from over 100% in 2021, according to Glassnode. This shift reflects growing institutional interest and a maturing market that views Bitcoin as a standalone asset class rather than merely a risk-on investment.
Fidelity data supports this perspective, showing Bitcoin as one of the best-performing asset classes when adjusted for risk. Additionally, Bitcoin’s correlation with the S&P 500 has dropped to just 19%, further indicating its growing independence from traditional markets.
Bitcoin vs. Ether: Correlation Weakens Among Leading Cryptos
The decoupling trend extends to Bitcoin and Ether (ETH), the two largest cryptocurrencies by market capitalization. Historically, the two assets have exhibited a strong correlation, often near 1:1. However, their 30-day rolling correlation now stands at just 0.35, the second-lowest level ever recorded.
This divergence is attributed to the market's evolving understanding of these assets' unique use cases. While Bitcoin increasingly resembles "digital gold," Ether is often viewed as the backbone of decentralized finance (DeFi) and blockchain applications.
Market Outlook: Bitcoin's Growing Maturity
Bitcoin's reduced correlation with both equities and other cryptocurrencies signals its maturation as an asset class. As the total cryptocurrency market hits a new all-time high of $3.025 trillion, Bitcoin continues to consolidate its position as the seventh-largest asset by market cap.
Analysts expect this trend to persist, with Bitcoin gradually decoupling from traditional risk-on assets and trading more on its own fundamentals. Whether in its relationship with equities or Ether, Bitcoin is increasingly proving to be an independent force in global markets.
