In financial markets, making assumptions based on short-term observations is a futile endeavor, as significant trends develop over months and years, not days or weeks. But as investors assess Bitcoin's role in their portfolios, April's events are worth analyzing to understand the asset's emerging reputation as a store of value.
Volatility Background
The turmoil sparked by President Trump's tariff announcement on April 2 led to a sharp decline in stock prices the following day, with the Nasdaq 100 and S&P 500 falling 4.8% and 5.4%, respectively. Bitcoin followed suit, with the VIX reaching levels not seen since the early days of the COVID pandemic, and fears of trade retaliation looming.
However, Bitcoin's price began a sharp recovery within days of the announcement, causing its correlation with both the Nasdaq 100 and the S&P 500 to fall below 0.50, before those correlations rose again as the April 9 tariff pause restored the "risk-on" status.
Bitcoin Correlations with Traditional Markets in April
This short-term observation is important because it underscores the changing nature of how investors view Bitcoin. While some still classify Bitcoin as a "risk-on" asset with a high beta, institutional sentiment is beginning to reflect a more nuanced understanding. Bitcoin recovered faster than the S&P 500 during the 60 days following the COVID-19 outbreak, Russia's invasion of Ukraine, and the 2023 U.S. banking crisis—events in which it demonstrated resilience and characteristics increasingly aligned with those of gold during periods of stress.
These decoupling periods establish a pattern where Bitcoin exhibits its anti-fragile properties, allowing allocators to protect capital during systemic events, while continuing to outperform stocks, bonds, and gold over the long term.
Bitcoin vs. Traditional Assets, 5-Year Returns The Road to Digital Gold
Perhaps the long-term impact on a Bitcoin portfolio is even more compelling than its long-term returns. Even a small allocation to Bitcoin within a traditional portfolio of 60% stocks and 40% bonds would have improved risk-adjusted returns in 98% of rolling three-year periods over the past decade. These risk-adjusted returns are significantly higher over longer time periods, suggesting that Bitcoin's volatility, driven by positive returns, more than offsets short-term declines. It may be premature to claim that Bitcoin has gained global acceptance as "digital gold," but this claim, supported by its response to geopolitical events, is gaining momentum. The combination of Bitcoin's stable supply, liquidity, ease of access, and immunity from central bank intervention gives it characteristics that no traditional asset can rival. This should appeal to any investor, large or small, seeking to diversify their portfolios and preserve their wealth over the long term.
