In the last four days (16.03 – 20.03), we were able to observe an interesting phenomenon: While the German stock index, as well as the American Dow Jones or S&P moving 500 hardly, it increased the Bitcoin exchange rate by almost 20 percent. This led, in particular, on Twitter to the omnipresence of the Hashtags #bitcoin decoupling. Behind the Hashtag, the idea that BTC was solved now officially of the movements of the stock market lies.In today’s article we want to take a look at the Charts and understand how justified the designation of the Bitcoin Decoupling actually is. To do this, we look at the short – and long-term correlation between BTC and the American stock market. We also look to the 5-day Performance of Bitcoin and the S&P 500. We may write in the future, so #bitcoin decoupling?
- 1 Bitcoin Decoupling: BTC exchange rate and the stock market
- 2 What correlation is? – A simple explanation
- 3 Bitcoin Decoupling: A phenomenon of the past?
Bitcoin Decoupling: BTC exchange rate and the stock market
As I have already indicated in the introduction, the concept of Bitcoin Decoupling the decoupling between BTC and the stock market. More precisely, it is a question that I have solved the Bitcoin price development of the stock market. Statistically, it comes to the correlation. But before we come to the concept of correlation and the related evaluation, let’s take another look at the trigger in this wave around the Hashtag #Bitcoin Decoupling.
S&P Performance for the last 4 days Overview
As we can see, the S&P 500 is fighting to prevent the fall. The downward trend is clear. The S&P lost within the last 5 days and another 6 percent and is currently trading at 2300 points.How it looks, but now when Bitcoin price? How could develop BTC in the last days?
Bitcoin price performance: +18 percent in the last 5 days
The picture here is clear. While the major stock indexes migrated in the last few days continue in the direction of the South, could Bitcoin crash by his massive price of 12. on the 13. March at least partially recover.Even if this looks positive, we must keep sober, that Bitcoin quoted is still 22 percent below its exchange value before the Crash (7.900 USD 12.03).Bitcoin savings plan: there’s Always the question after a good Investment is made strategy for BTC. With the help of the Cost Average effect and minimize you to sleep your risk, can better and benefit long term from the long-term development of Bitcoin and co. – it’s that Simple! As a Bitcoin savings plan works.
What correlation is? – A simple explanation
As a reminder: correlation is a statistical measure that is defined in the interval of (-1 ; 1). A value of -1, we speak of a negative correlation. A value of 0, we speak of uncorrelated and a value of +1, we speak of a positive correlation.The correlation compares – simply the behavior of the two assets expressed in terms of values. To illustrate: If two assets or indices behave the same, then a positive correlation is present. Asset A rises, asset B increases as well. The correlation of asset A with asset B would be at +1.If two assets tend to be negatively correlated, then asset A rises, while asset B falls, and vice versa. Here, the correlation would have a value of -1.Two assets are uncorrelated values, we can see no clear connection. In other words: the value development of the asset values do not influence each other.
Bitcoin and S&P 500 correlation on a short-term point of view
Now let’s look at the correlation between Bitcoin and the S&P 500. We use a fairly short-term time-window of 1 month. In practice, it is, however, common long-term time window, in order to obtain a meaningful number in terms of the correlation.The Chart is very interesting. This is due to the fact that Bitcoin up to 11. March was almost completely uncorrelated from the S&P 500. Since the 11. March spring the correlation, however, leaps and bounds to a level of up to 0.6. Thus, Bitcoin has behaved since 11. March, so very similar to the performance of the S&P 500. Now let’s look at the longer-term correlation.
Bitcoin and S&P 500 correlation on a medium – to long-term point of view
From the previous section, we can therefore take with you: the 30-day correlation, shows that Bitcoin was also affected by the crash of the S&P 500. In this respect, the correlation rose dramatically. Before that, however, there was no correlation between Bitcoin and the S&p As it looks now, however, if we consider a longer period of time of 3 years. What conclusions can we draw from this and what is the Bitcoin Decoupling?We note that the correlation has moved in the last 3 years, always in an interval of (-0.25 ; 0.3). There is a kind of cyclical nature of the correlation. Most of the time the correlation was in the narrow interval of (-0.1 ; 0.1). What can we conclude now, but in the end?Trade on the worlds leading Social Trading platform!Join the millions of people who have already discovered how it smarter to invest by copying the best investors in our Community, or be copied and as a result, a second income can be achieved. Start now!
Bitcoin Decoupling: A phenomenon of the past?
The conclusion looks like: Bitcoin, the whole year was over already ‘decoupled’. BTC moved largely independently of developments in the financial market. Only with the recent Crash and the massive economic dislocations in the Wake of the Coronavirus, the correlation between BTC and the stock market. So, the opposite is true, so: Bitcoin for the last few days hooked up to the stock market. It is a short-term Coupling and no Decoupling took place so rather.Furthermore, we must note that correlation is something that we need to measure over a long period of time. Therefore, a few days can not be seen absolutely as a justification for a Coupling or Decoupling. What has happened in the last few days, is an absolute state of exception. The world, the courses of the largest of the indices fell:
Bitcoin bends in the short term, the pressure of the global turmoil
Billions and trillions of dollars flowed out of the markets. The production in many companies was suspended and supply chains broke. The public life is largely shut down. The Bitcoin bends under such circumstances, in the short term, ‘the pressure of the markets’ and, therefore, similarly, is probably to be expected. Obviously, Bitcoin is now slowly recovering from the short-term Coupling with the equity indices.In my opinion it is to talk now a little early from a further Decoupling to. Nevertheless, it is positive that BTC could prove just in the last 2-3 days as a strong counterpoint to the stock market. If this Trend continues the next few days continue, and Bitcoin may rise despite declines in the stock market, then we may cheer, in fact, the re Bitcoin Decoupling.62 % of private CFD accounts lose money. No EU investor protection.How do you see the recent developments in the Bitcoin exchange rate? – BTC has only a correction, or is this the beginning of the decoupling from the stock market?Come on in to our Telegram Chat and talk with the experts and the Community!
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