In recent weeks and months, bitcoin prices have become increasingly correlated with stocks. Of course, this is remarkable. Because a few years ago, the BTC price was independent of the international financial markets. Let's look at the main reasons why Bitcoin is correlated with stock price movements and the growing correlation between the two.
Why is bitcoin tied to the stock market?
This trend has been confirmed in recent weeks and months. The price of bitcoin gradually began to fluctuate according to stock market prices. Specifically, the stocks of U.S. technology companies listed on the Nasdaq Composite Index. In fact, bitcoin price movements are in line with recent stock market movements.
The two K-line charts below show parallel trends for the Nasdaq and BTC/USD currency pairs.
Related – Current Bitcoin Price Forecast and BTC Future Forecast 2022-2025
Nasdaq 1 day chart
BTC/USD 1 Daily Chart
In addition, we are seeing news about the Russia-Ukraine crisis taking a toll on BTC. Not only stocks, but also external factors are now significantly affecting the price of Bitcoin.
There are several main reasons for this, which we can shelve as follows.
- In recent years, institutional investors have taken over the cryptocurrency market. First of all, Bitcoin. As a result, financial developments can affect their willingness to invest.
- In recent months, we have seen Bitcoin increasingly appear in the stock market. The first BTC ETFs were approved in the last quarter of 2021.
- Now, the increasing number of regulations in different countries/regions make bitcoin more of a classic financial product.
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Will Bitcoin's correlation with the stock market continue in the future?
For this reason, first of all, it is necessary to continue with the following questions. Is Bitcoin now turning into one of the common assets in the financial markets? If this transformation is in doubt, its promise to the financial markets will continue. However, the growth in areas such as DeFi and NFT can take the cryptocurrency market to a very different level compared to the traditional market.
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