According to U.Today, Fidelity Global Macro Director Jurrien Timmer revealed in a recent post on the X social media network that Bitcoin, the largest cryptocurrency by market value, now has a "mostly negative" correlation with the S&P 500, one of the benchmark indices for the U.S. stock market.
âFor those in the 60/40 space and with Bitcoin on the menu, itâs important to note that Bitcoinâs correlation with stocks has fallen significantly, and its annualized volatility has also fallen,â Timmer wrote on X.
Negative correlation means Bitcoin is a more attractive option for a diversified portfolio. However, it also makes it more difficult for crypto traders to interpret price action, as Bitcoin may not move in sync with stocks based on macroeconomic data. In 2022, the largest cryptocurrency fell in tandem with stocks as the Federal Reserve rushed to raise interest rates to curb runaway inflation. For example, in March 2022, Bitcoin's correlation with the S&P 500 surged to nearly 0.50, its highest level since 2020. However, the correlation began to decline in 2023.
This makes Bitcoin an attractive investment option again, as the flagship cryptocurrency has the ability to once again serve as a ârobust diversification tool,â research firm K33 said in March 2023.
