Bitcoin price, for most of its existence, has been pitched as an asset that is unrelated from traditional equities and the stock market. This has been the strong selling point for the institutional investors who seek to add diversity or reduce the risk for their portfolio.
However, lately, the king of cryptocurrency has been showing signs of correlation with the stock market, and if the trend continues then it could sound the death knell for this relatively young virtual asset.
Bitcoin price correlation with S&P 500
The birth of Bitcoin happened during the recession, and it is about to come face-to-face with its first-ever major recession, and nobody is sure how it might react.
Bitcoin was created to have certain attributes that would make it far more comparable to traditional commodities, such as gold. The design of the cryptocurrency was based on the idea to make it an asset that does not need to be printed or has to be tied to the value of some corporation.
These attributes have helped Bitcoin to gain the position of highly uncorrelated assets that investors seek to add in their investment portfolio, even if it a small portion.
However, with the recent spread of the Coronavirus, there has been widespread panic and consequently led to the massive selloff. Bitcoin price has unexpectedly started showing signs of correlation with the stock market.
Moreover, this correlation has become so noteworthy that Bitcoin and one of the key stock indexes to the U.S. economy, S&P 500 has begun showing an uncanny resemblance.