The correlation between Bitcoin and the U.S. stock market has reached unprecedented levels. Through extensive analysis of market data, we find that this correlation is not only reflected in price trends but also deeply mirrors structural changes in the entire financial system.
According to the latest data, the 30-day rolling correlation coefficient between Bitcoin and the S&P 500 index has reached 0.68, significantly up from 0.45 at the same time last year. Notably, this correlation tends to strengthen further during periods of increased market volatility. When we extend the time frame to 90 days, the correlation coefficient remains at a high level of 0.65, indicating that this relationship has enduring characteristics.
In terms of risk metrics, Bitcoin exhibits significantly higher volatility characteristics compared to U.S. stocks. The latest data shows that Bitcoin's 30-day annualized volatility is 42.5%, while the S&P 500 index's volatility during the same period is only 15.2%, making the former 2.8 times higher than the latter. This difference in volatility is directly reflected in the Value at Risk (VaR) metric: under a 95% confidence interval, Bitcoin's 5-day VaR is -12.4%, far exceeding the S&P 500's -4.2%.
In terms of risk-adjusted returns, Bitcoin's performance is inferior to that of the S&P 500. Based on a risk-free rate of 4.5%, Bitcoin's Sharpe ratio is 0.87, which is lower than the S&P 500's 1.24. This means that investors are actually receiving less excess return from Bitcoin for each unit of risk taken compared to investing in the S&P 500.
The structural risks in the market cannot be overlooked. The participation of institutional investors in the Bitcoin market continues to rise, with the current institutional holding ratio reaching 18.2%, and the total size of spot ETFs reaching $28.5 billion. While this institutional trend has increased the professionalism of the market to some extent, it has also heightened systemic risk. Especially with the average market leverage at 2.1 times, any significant market fluctuations could trigger a chain reaction.
Liquidity metrics are also worth noting. Bitcoin's average daily trading volume remains around $28 billion, which is still significantly lower than the S&P 500's $120 billion. More importantly, the median bid-ask spread for Bitcoin is 0.12%, which is 12 times that of the S&P 500 ETF (0.01%), reflecting that the liquidity costs of the Bitcoin market remain relatively high.
Volatility forecasts from the GARCH model indicate that Bitcoin's expected volatility over the next 30 days could reach 45.2%, while the expected volatility for the S&P 500 is 16.8%. The Vector Autoregression (VAR) model predicts that within a 95% confidence interval, Bitcoin's price movement range over the next 30 days will be between -25% and +15%, while the S&P 500's movement range will be between -10% and +5%.
Against the backdrop of increasing correlation between Bitcoin and U.S. stocks, any factors triggering systemic risk could lead to cross-market chain reactions.