The Early Days: Bitcoin as a “Non-Correlated Asset”
In its initial years, Bitcoin was often described as a “non-correlated” or even “anti-correlated” asset, meaning that its price movements were believed to be independent of traditional financial assets like stocks and bonds. Investors saw it as a hedge against economic downturns and inflation, similar to gold, often calling it “digital gold.” During financial crises or market volatility, some expected Bitcoin to perform well, similar to other safe-haven assets.

Emerging Correlations: The Role of Global Market Sentiment
As Bitcoin matured and the market evolved, it started to show increasing correlation with traditional financial markets, particularly during periods of heightened risk. For instance, during the global financial uncertainty surrounding the COVID-19 pandemic, both stock markets (e.g., NASDAQ, S&P 500) and Bitcoin experienced sharp declines in March 2020. This was an indication that Bitcoin was no longer operating in isolation from broader financial sentiment.

Macro Trends: Risk-On and Risk-Off
Bitcoin, like other risk-on assets, tends to perform well during periods of high liquidity and low interest rates. Central banks around the world, including the U.S. Federal Reserve, have played a critical role in fostering a risk-on environment by lowering interest rates and engaging in quantitative easing. As investors sought higher returns, they allocated funds to riskier assets like stocks and cryptocurrencies.
Conversely, when central banks signal rate hikes or tighten monetary policy, risk-off sentiment tends to prevail, leading to declines in both stock markets and Bitcoin. This growing correlation suggests that Bitcoin is increasingly behaving like a high-risk asset, rather than an uncorrelated safe haven.

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