Original Title: Is Bitcoin Decoupling from the Market?
Original Authors: Tanay Ved, Victor Ramirez, Coin Metrics
Original Translator: Luffy, Foresight News
Key Points:
Bitcoin's correlation with stocks and gold has recently dropped to near-zero levels, indicating that Bitcoin is in a phase of decoupling from traditional assets, which typically occurs during significant market catalysts or shocks. While the correlation between Bitcoin and interest rates is low, changes in monetary policy can also affect Bitcoin's performance. During the monetary tightening cycle from 2022 to 2023, there was a strong negative correlation between Bitcoin and rate hikes. Despite often being referred to as 'digital gold,' historically, Bitcoin has exhibited a higher beta coefficient and stronger upside sensitivity relative to stocks, especially in optimistic macroeconomic conditions. Since 2021, Bitcoin's volatility has steadily decreased, and its volatility trend is now closer to that of popular tech stocks, reflecting its risk characteristics maturing.
Introduction
Is Bitcoin decoupling from the broader market? Bitcoin's recent strong performance relative to gold and stocks has reignited discussions on this topic. Throughout Bitcoin's 16-year history, it has been labeled variously from 'digital gold' to 'store of value' to 'risk-on asset.' But does it truly possess these characteristics? Is Bitcoin as an investment asset unique, or is it merely a leveraged manifestation of existing risk assets in the market?
In this edition of the (Coin Metrics Network Status Report), we will explore Bitcoin's performance in different market environments, focusing on the catalysts and conditions behind the periods of low correlation with traditional assets like stocks and gold. We will also examine how changes in monetary policy regimes affect Bitcoin's performance, assess its sensitivity to the broader market, and analyze its volatility characteristics in conjunction with other major assets.
Bitcoin under different interest rate regimes
The Federal Reserve is one of the most influential forces in financial markets because it can affect interest rates. Changes in the federal funds rate, whether in a tightening or easing scenario, directly impact the money supply, market liquidity, and investors' risk appetite. Over the past decade, we have experienced a transition from a zero interest rate era, to unprecedented monetary easing during the COVID-19 pandemic, and then to aggressive rate hikes in 2022 to combat rising inflation.
To understand Bitcoin's sensitivity to changes in monetary policy, we have divided its history into five key interest rate regime phases. These phases consider the direction and level of interest rates, ranging from accommodative (federal funds rate below 2%) to tightening (federal funds rate above 2%). Since changes in interest rates are not frequent, we compare Bitcoin's monthly returns with the monthly changes in the federal funds rate.
Data Source: Coin Metrics and the New York Federal Reserve Bank
Although the correlation between Bitcoin and changes in interest rates is generally low and concentrated around the middle level, clear patterns still emerge when policy regimes shift:
· Easing policy + Zero interest rates (2010 - 2015): Under the zero interest rate policy following the 2008 financial crisis, Bitcoin achieved its highest returns. The correlation between Bitcoin and interest rates was roughly neutral, aligning with Bitcoin's early growth phase.
· Easing policy + Rate hikes (2015 - 2018): As the Federal Reserve began to raise rates toward 2%, Bitcoin's returns exhibited fluctuations. Although there was a surge in correlation in 2017, it remained at a low level overall, indicating a certain decoupling from macro policies.
· Easing policy + Rate cuts (2018 - 2022): In response to the COVID-19 pandemic, this period began aggressive rate cuts and fiscal stimulus measures, followed by two years of near-zero interest rates. Bitcoin's returns varied significantly but leaned positive. During this period, the correlation fluctuated dramatically, rising from below -0.3 in 2019 to +0.59 in 2021, and then returning to a near-neutral level.
· Tightening policy + Rate hikes (2022 - 2023): In response to soaring inflation, the Federal Reserve implemented one of its fastest rate hike cycles, pushing the federal funds rate above 5%. In this regime, there was a strong negative correlation between Bitcoin and changes in interest rates. Under the influence of risk-averse sentiment, Bitcoin's performance weakened, especially when compounded by unique shocks in the cryptocurrency space, such as the collapse of FTX in November 2022.
· Tightening policy + Rate cuts (2023 - Present): With the completion of three high-level rate cuts, we see Bitcoin's performance shift from neutral to moderately positive. This period also saw some catalysts such as the U.S. presidential election and trade war shocks, which continue to affect Bitcoin's performance. The correlation remains negative but seems to be gradually approaching 0, indicating that as macroeconomic conditions begin to ease, Bitcoin is in a transitional phase.
While interest rates determine the market backdrop, comparing Bitcoin's relationship with stocks and gold can better reveal its performance relative to major asset classes.
The relationship between Bitcoin's returns and those of gold and stocks
Correlation
To determine whether one asset has decoupled from another, the most direct method is to look at the correlation between their returns. Below is a chart of the 90-day return correlation between Bitcoin and the S&P 500 index and gold.
Data Source: Coin Metrics
Indeed, we see that Bitcoin's correlation with gold and stocks has historically been low. Typically, Bitcoin's returns fluctuate between correlations with gold or stocks, with a generally higher correlation with gold. Notably, as market sentiment heats up, Bitcoin's correlation with the S&P 500 index increased in 2025. However, starting around February 2025, the correlation of Bitcoin with both gold and stocks tends toward zero, indicating that Bitcoin is in a unique phase of 'decoupling' from gold and stocks. This situation has not occurred since the peak of the last cycle at the end of 2021.
What usually happens when the correlation is so low? We compiled periods when the rolling 90-day correlation of Bitcoin with the S&P 500 index and gold fell below a significant threshold (approximately 0.15), annotating notable events at that time.
Periods of low correlation between Bitcoin and the S&P 500 index
Periods of low correlation between Bitcoin and gold
Unsurprisingly, past instances of Bitcoin decoupling from other assets have occurred during significant shocks in the cryptocurrency market, such as China's ban on Bitcoin and the approval of Bitcoin spot ETFs. Historically, low correlation periods typically last around 2 to 3 months, although it depends on the correlation threshold you set.
These periods indeed accompanied moderate positive returns, but given that each period has its uniqueness, please consider carefully the distinct aspects of these periods before drawing any conclusions about Bitcoin's recent performance. That said, Bitcoin's low correlation with other assets in recent times is an ideal characteristic for those looking to allocate a significant portion of Bitcoin in a diversified investment portfolio.
Market beta coefficient
In addition to correlation, the market beta coefficient is another useful indicator of the relationship between an asset's returns and those of the market. The market beta coefficient quantifies the extent to which an asset's returns are expected to change with market returns; it is calculated based on the asset's returns minus the risk-free rate relative to a benchmark. Correlation measures the direction and strength of a linear relationship between an asset and benchmark returns, while the market beta coefficient measures the direction and magnitude of an asset's sensitivity to market fluctuations.
For example, it is often said that Bitcoin trades with a 'high beta coefficient' relative to the stock market. Specifically, if an asset (like Bitcoin) has a market beta coefficient of 1.5, then when the market benchmark asset (S&P 500 index) changes by 1%, the expected return of that asset will change by 1.5%. A negative beta coefficient means that when the benchmark asset's return is positive, the asset's return is negative.
For most of 2024, Bitcoin's beta coefficient relative to the S&P 500 index is significantly above 1, indicating it is highly sensitive to stock market fluctuations. In optimistic, risk-appetite-driven market environments, investors holding a certain proportion of Bitcoin achieved higher returns compared to those holding only the S&P 500 index. Although Bitcoin is often labeled as 'digital gold,' its low beta coefficient relative to physical gold suggests that holding both assets simultaneously can hedge the downside risks of each.
As we approach 2025, Bitcoin's beta coefficient relative to the S&P 500 index and gold begins to decline. While Bitcoin's dependence on these assets is decreasing, it remains sensitive to market risks, and its returns still correlate with market returns. Bitcoin may be becoming a unique asset class, but its trading behavior largely remains similar to that of risk-on assets, and there is currently no strong evidence to suggest it has become a 'safe-haven asset.'
Bitcoin performance during high volatility periods
Realized volatility provides another dimension to understanding Bitcoin's risk characteristics, measuring the extent of Bitcoin's price fluctuations over a period of time. Volatility is often considered one of Bitcoin's core characteristics, serving as both a driver of risk and a source of returns. The chart below compares Bitcoin's 180-day rolling realized volatility with the volatility of major indices such as the Nasdaq index, S&P 500 index, and some tech stocks.
Data Source: Coin Metrics and Google Finance
Over time, Bitcoin's volatility has shown a downward trend. In Bitcoin's early stages, driven by substantial price increases and correction cycles, its realized volatility frequently exceeded 80%-100%. During the COVID-19 pandemic, Bitcoin's volatility rose alongside stock volatility, and in some periods of 2021 and 2022, it also increased independently due to unique shocks in the cryptocurrency space such as the collapses of Luna and FTX.
However, since 2021, Bitcoin's 180-day realized volatility has gradually decreased, stabilizing around 50%-60% even in times of higher market volatility. This makes its volatility comparable to many popular tech stocks, lower than MicroStrategy (MSTR) and Tesla (TSLA), and very close to Nvidia (NVIDIA). Although Bitcoin remains susceptible to short-term market fluctuations, its relative stability compared to past cycles may reflect its maturity as an asset.
Conclusion
Has Bitcoin decoupled from other parts of the market? It depends on how you measure it. Bitcoin is not entirely unaffected by the real world. It remains subject to market forces that influence all assets: interest rates, specific market events, and the returns of other financial assets. Recently, we have seen the correlation between Bitcoin's returns and other parts of the market disappear, but whether this is a temporary trend or part of long-term market changes remains to be seen.
Whether Bitcoin has decoupled raises a larger question: what role can Bitcoin play in a portfolio that seeks to diversify risk? The risk and return characteristics of Bitcoin may confuse investors; one week it may resemble a highly leveraged Nasdaq index, another week it acts like digital gold, and another week it becomes a tool for hedging against fiat currency devaluation. But perhaps this volatility is a feature, not a flaw. Rather than making imperfect analogies between Bitcoin and other assets, a more constructive approach is to understand why, as Bitcoin gradually develops into a unique asset class, it will forge its own market.
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