Digital assets differ from other types of digital assets. That’s part of what makes them appealing to many — but it can also spur confusion.
Investors are increasingly looking for ways to diversify and hedge their portfolios.
In a recent FTSE Russell Report, there was a clear conclusion: Since 2020 the rolling correlations between bitcoin and ether have increased dramatically with risky assets.
If we look at BTC in particular, the Russell 1000 index — comprising US large-cap stocks — has a 0.58 correlation to the asset. That relationship is nearly as strong for BTC and US financial stocks and US tech stocks — at 0.53 and 0.52, respectively.
Since Covid there has been a correlation between BTC and US High Yield Credit (the most common). “risk-on” The fixed-income asset class (fixed income asset category) has a value of 0.49.
Before the Covid-19 epidemic (which caused inflation and monetary contraction), these correlations were all much closer to 0.
7–10 year US Treasurys were rather unique in not seeing a meaningfully higher correlation to BTC after Covid. Over those years, the US dollar has been the only currency to have a negative correlation between BTC and ETH.
Bitcoin is often compared with gold. However, in the post-Covid period the correlation between BTC and gold was only 0.15.
BTC’s volatility may be a distraction from the real value of BTC (and its varying significance as a safe-haven or store of value in the financial markets). “true correlation” Report notes that these returns are not equal.
Adds to: “But the true correlation may simply be low, reflecting the fact that bitcoin and ETH are predominantly risk-on assets, whereas gold has a long-established trading history as a ‘safe haven’ asset, even if they do share some store of value characteristics.”
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