S&P 500 e Bitcoin, la lunga correlazione

Bitcoin is said to be a safe haven asset, suggesting that when stock indices, including the S&P 500, fall, bitcoin remains stable or rises.

This is not really the case.

What is the S&P 500 

The S&P 500 is one of the most important stock indexes in the United States market. Founded by Standard & Poor’s in 1957, it tracks the performance of around 500 of the best-known companies listed on the NYSE and Nasdaq. 

Its basket therefore includes some of the most important companies such as Apple, Microsoft, Warren Buffett’s Berkshire Hathaway, but also Facebook and Alphabet (Google). 

It goes without saying that the value of the index is directly influenced by the stock market performance of the companies in the basket. 

The correlation between bitcoin and the S&P 500

The first difference is that bitcoin is traded 24 hours a day, 7 days a week. Whereas the S&P 500, following the stock markets, has a chart that reflects the trend from Monday to Friday, stopping on Saturdays and Sundays and particular holidays.

Looking at the yearly graphs, it appears that the two indices seem quite correlated.

For example, from March 2020 to March 2021 both have certainly seen an increase in their strength, although bitcoin’s rise is unparalleled. 

It is enough to consider that on March 13th, 2020 Bitcoin had fallen below $4,000 (it was the day of the Covid panic that overwhelmed all markets, including cryptocurrencies) while on Saturday, March 13th, 2021 Bitcoin reached a new record of $60,000. 

Bitcoin has seen its value rise 15 times in 12 months. The S&P 500 on the other hand has risen from 2,300 points in March 2020 to the current 3,900 points. Despite growing by a lot, it has not even doubled. However, the stock market is much more stable and less volatile than the cryptocurrency market, which is accustomed to strong fluctuations.

In any case, in the long term, both seem to have a positive trend. 

In the short term, it appears instead that the two follow a distinct trend. For example, these days when bitcoin is falling, the S&P 500 is trending positive. However, bitcoin’s current decline was expected given the weekend’s rally which took it to a record high of over $60,000. 

That of bitcoin remains a performance that puts the financial markets to shame.