Last week, Bitcoin recovered, surpassing the $91,000 mark for the first time since early March, after having fallen below $80,000 earlier in April. It briefly rose to $94,000, which is 25% below the lows of April 9. Meanwhile, American stocks like the S&P 500 rose by 14% during the same time. This relative outperformance, along with a weakening of how closely these two assets move in tandem, has reignited discussions about Bitcoin's separation from stocks.
Correlation metrics, such as the 30-day Pearson correlation coefficient, were used to support the idea that a decoupling is already close. It can be argued that the most important aspect of these correlation indicators is the direction of the relationship, for example, one increases while the other increases. A reading close to 1 means they move together; around 0 means they move independently, and -1 means they move in opposite directions.
Over the past three weeks, the 30-day Pearson correlation coefficient has shown that Bitcoin and stocks are transitioning from moving together to moving independently. The coefficient has decreased from over 0.80 at the beginning of April to less than 0.35 now.
However, I view correlation metrics with a degree of skepticism. Bitcoin's correlation with stocks—especially with benchmark indices like the S&P 500 and Nasdaq—has changed significantly over time. It has shown positive, negative, and close to zero correlation at different points in its history.
When people talk about a decoupling, I think they actually mean that Bitcoin has finally started to behave like a safe asset, similar to gold, rather than a risky asset like stocks.
Depending on your perspective, we have either already reached this goal or are approaching it.
On one hand, Bitcoin has been the most productive asset over the last 10 years—there's no second best. Those who held it through volatility long enough have protected and, in many cases, significantly increased their net worth.
On the other hand, Bitcoin's volatility, which induces shudders during risk-off events, still aligns more closely with stocks than with traditional safe-haven assets. During market downturns, Bitcoin has historically sold off alongside risky assets—a hardly reassuring trait for those seeking stability.
I believe Bitcoin will eventually become a full-fledged safe-haven asset, but we are not there yet. However, with a sufficiently low time preference (and a strong stomach), say 5 years or more, I think Bitcoin already is one.
Beyond the narrative of a safe haven, I think there are explanations for Bitcoin's recent outperformance. One is that corporations have started investing in the Bitcoin treasury scenario, which became famous due to Saylor's Strategy and which Metaplanet has shown can be replicated. Now companies are being created solely to conduct this business.
Spot Bitcoin ETFs continue to provide a firmer price threshold than the cryptocurrency trading community operating on paper. American spot Bitcoin ETFs attracted nearly $1 billion in new capital last week.
Finally, the U.S. transition from crypto antagonism to cooperation is likely a pro-crypto secular shift that increases the adoption of cryptocurrencies in the U.S., not to mention providing a tailwind for American crypto companies. Certainly, Bitcoin will be the overwhelming beneficiary of Americans buying crypto assets.
In brief, regarding crypto assets other than Bitcoin, almost the entire cryptocurrency market has risen this week, even Ethereum, which has increased by 11% over the past seven days. SOL has risen by 13%, DOGE by 15%, and LINK by 19%. It is unclear whether this is a bounce before further decline or the start of a risk rally.
-David Sensil
