Thanks to skyrocketing prices in late 2020 and with all the recent hype around NFTs (Non-fungible tokens, or tokenized digital objects) Bitcoin has been turning heads.
But while Bitcoin is often described as the new kid on the block in safe-haven assets, let's take a look at the other side of the coin (🤓): Bitcoin’s growing correlation to markets.
Historically (if we can even say that for a currency that's only 12 years old), Bitcoin’s unique price actions have made it an attractive tool for portfolio diversification.
And then came 2020.
Last year was the highest on record for bitcoin’s correlation to traditional asset classes.
The reasons behind this are many:
- Institutional investors getting involved in the cryptocurrency field.
- Bitcoin’s growing adoption by global companies (Starbucks, Tesla, PayPal, etc.)
- Maybe even the fact that large stimulus packages are being distributed on a regular basis to budding bitcoin/stock market enthusiasts with time (and now money) on their hands.
But with this correlation, Bitcoin’s key argument of being the shiny new safe haven could fade away to be replaced by a new title: the shiny new speculative asset on the block.
If Bitcoin's correlation to stocks proves to be correct, the stock market's recent signs of fatigue could mean there is trouble ahead for the famous digital currency...
