The volatility correlation between Bitcoin and the U.S. stock market is raising doubts about the safe-haven role of this cryptocurrency amid global financial tensions.
According to a new study from RedStone Oracles – a blockchain data provider, Bitcoin is showing a clear negative correlation with U.S. equities when analyzed in the short-term 7-day timeframe.
7-day dynamic correlation of Bitcoin and S&P 500 | Source: Redstone Oracles
However, according to RedStone, the 30-day dynamic correlation indicator shows that the relationship between Bitcoin prices and the S&P 500 index is unstable – with the correlation coefficient fluctuating between -0.2 and 0.4.
This volatility range reflects an important reality: Bitcoin does not maintain a strong enough negative correlation to serve as a true hedge against stocks. Specifically, the report emphasizes that a negative correlation of below -0.3 is necessary to establish the capability of 'reliably moving in the opposite direction during pressure market stages.' The lack of clear divergence raises doubts about Bitcoin's safe-haven role in the context of global financial volatility.
30-day dynamic correlation of Bitcoin and S&P 500, 1-year chart | Source: Redstone Oracles
Studies show that while Bitcoin may not serve as an effective hedge against stock market declines, it still demonstrates significant value as a diversification factor in a portfolio.
The fluctuations in correlation with traditional assets show that Bitcoin often tends to move independently, providing profit potential during times when other assets are weakening. However, according to RedStone, Bitcoin has yet to demonstrate a clear safe-haven characteristic like gold or government bonds – assets that typically tend to appreciate during financial crises.
Bitcoin needs to 'mature' before detaching from the stock market.
Although Bitcoin is gradually shaping its role as a safe-haven asset in the future, the world's first cryptocurrency still needs time to 'mature' and assert its status as a global asset, according to Marcin Kazmierczak, co-founder and COO at RedStone.
"Bitcoin is not yet mature enough to completely detach from the volatility trajectory of the stock market," Kazmierczak stated, while emphasizing that the increasing acceptance from financial institutions will play a key role in this process. He cited: "We have seen a clear impact when companies incorporate Bitcoin into their treasury reserves, contributing to reducing the 30-day volatility of this asset. Along with that, BlackRock's continuous affirmation of Bitcoin's role in portfolios is a positive signal."
While awaiting that 'maturity,' Kazmierczak believes Bitcoin will continue to be recognized as an effective portfolio diversification tool. With an annual return of over 230% over the past five years – far surpassing both stocks and traditional safe-haven assets, Bitcoin has proven its superior potential.
"Even if it only accounts for a small proportion of 1-5% in a portfolio, Bitcoin can significantly enhance risk-adjusted returns," he emphasized.
Source: Vetle Lunde
Meanwhile, the decreasing volatility of Bitcoin reinforces the increasingly clear maturation process of this cryptocurrency in its role as a global financial asset. On April 30, Bitcoin's weekly volatility hit its lowest level in 563 days, a sign that price action is becoming more stable – a key factor for widespread recognition in traditional financial markets.
Notably, Bitcoin's volatility level has now fallen below both the actual volatility index of the S&P 500 and Nasdaq 100, a rare development. This indicates that more and more investors view Bitcoin not just as a speculative asset, but as a long-term investment vehicle that can be strategically integrated into a portfolio.
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Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do thorough research before making decisions. We are not responsible for your investment decisions.