Bitcoin’s fluctuating correlation with US equities is raising questions about its role as a global safe-haven asset during periods of financial stress.
Bitcoin (BTC) exhibited a strong negative correlation with the US stock market when analyzing the short-term, seven-day trailing correlation, according to new research from blockchain data provider RedStone Oracles, shared exclusively with Cointelegraph.
Bitcoin, S&P 500, 7-day rolling correlation. Source: Redstone Oracles
However, RedStone said that the 30-day indicator signals a “variable correlation” between Bitcoin price and the S&P 500 index, with the correlation coefficient ranging from -0.2 to 0.4.
This fluctuating correlation suggests that Bitcoin “doesn’t consistently function as a true hedge for equities” due to its lack of a strong negative correlation below -0.3, which is needed for “reliable counter movement during market stress,” the report said.
Bitcoin, S&P 500, 30-day rolling correlation, 1-year chart. Source: Redstone Oracles
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The research suggests that while Bitcoin may not be a dependable hedge against stock market declines, it offers value as a portfolio diversifier.
This fluctuating dynamic signals that Bitcoin often moves independently from other assets, potentially offering additional returns while other assets are struggling. Still, Bitcoin has yet to mirror the safe-haven dynamics of gold and government bonds, RedStone suggests.
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Bitcoin needs to “mature” before decoupling from stock market
While Bitcoin is poised to grow into a safe-haven asset in the future, the world’s first cryptocurrency still needs to “mature” as a global asset, according to Marcin Kazmierczak, co-founder and chief operating officer at RedStone.
“Bitcoin still needs to mature before decoupling from stock markets,” Kazmierczak told Cointelegraph, adding:
“Increased institutional adoption will absolutely help — we’re already seeing this effect with corporate treasury investments reducing Bitcoin’s 30-day volatility and with BlackRock repetitively praising BTC as an asset in a portfolio.”
Meanwhile, Bitcoin will see growing recognition as a portfolio diversifier, with an annualized return of over 230% for the past five years, which “significantly outperformed” both stocks and traditional safe-haven assets, Kazmierczak said, adding that “even a small 1–5% Bitcoin allocation can meaningfully enhance a portfolio’s risk-adjusted returns.”
Source: Vetle Lunde
Meanwhile, Bitcoin’s declining volatility supports BTC’s growing maturity as a global financial asset. Bitcoin’s weekly volatility hit a 563-day low on April 30, a development that may signal more stable price action.
Bitcoin’s price volatility fell below the realized volatility of the S&P 500 and the Nasdaq 100, signaling that investors are increasingly treating Bitcoin as a long-term investment vehicle, Cointelegraph reported on May 13.
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