The Bitcoin correlation with stocks increases again, the normal service is resumed

the central theses

• Bitcoin in the past few weeks has been slightly deviated from the shares
• The correlation has recovered since then
• The technology -based Nasdaq continues to act in step with bitcoin, since investors in both investment classes look for changed expectations regarding the interest rates

there were a few strange weeks on the market. The banking jackets of the past few weeks, triggered by the Bank Run to the crypto-friendly Silicon Valley Bank (SVB), let everything run a bit shaky.

One of the strangest aspects was a deviation from the normal Bitcoin/stock relationship. Or somehow. Bitcoin raced up, while the markets digested the bank messages, whereby the correlation-at least in the case of a short-term rolling 30-day metric-broke in according to the following graphic.

The graphic also shows that the correlation has increased again in the meantime.

as I wrote in a deep dive At that time we saw these cases of temporary falling correlation a few times last year, most remarkable at the FTX crash in November and at the crashs of Celsius and Luna in front of it.

but in any case the correlation roared back. The diagram above shows that it starts to do the same again this time. And the diagram below shows that the relationship here is quite tight, no matter how you swing it (and please forgive the axis crime in this case).

What happens next?

The interesting question is what will happen in the future. The most important development recently affected the expectations regarding the future development of interest rates.

The forecasts were transformed. Since the interest rate increases uncover the mismanagement of the collapsed banks, the problems have caused the market to predict the plans for a further increase.

instead of future increases are now cuts in the pipeline, or at least according to the probabilities that are implied by Fed futures.

and it was the transition to this new zinsparadigma that took place last year when inflation started to take roots and realized that the central banks had to act, which the correlation between stocks and Bitcoin drove up.

it is not that one controls the other, but that Jerome Powell checks both. Tech shares are particularly sensitive to interest, since the sector is evaluated so much by the discounting of future cash flows-and lack of current profits-why the correlation and the bloodbath in 2022 between Bitcoin and the NASDAQ were so strong.

whether a potential swivel from this extremely tight monetary policy will lead to a future deviation of the correlation remains to be seen. Maybe it will be to a certain extent, but at the same time it remains difficult to find a strong argument that Bitcoin is willing to really deviate.

decoupling remains the ultimate bull vision for the asset, and maybe one day it will get there one day. But there are not many evidence, apart from blind hopes from the industry that this is imminent.

over a time horizon of several years into the future? This is everyone's assumption. But if we have taught something for the past few years, then that shares and bitcoin are paired on the hip, especially technology shares. The last few weeks and the resumption of this trend are actually more of a memory than evidence against the theory.