Data Indicates Bitcoin Price is Uncorrelated with Stock Market

A frequently asked question about bitcoin is whether the stock market influences its price, or whether the cryptocurrency acts as a 'safehaven' during stock market downturns.

One measurement that can help deduce whether the stock market and bitcoin prices are correlated is a technical finance measurement called beta.

During the robust stock and crypto market year of 2017, bitcoin almost had a perfect beta value with the stock market of 0.92.

In 2016, bitcoin had a beta value of just -0.16, suggesting no correlation, or a slight inverse correlation with the market.

These figures suggest that bitcoin is not correlated with the stock market, or, if it is, the price volatility makes it hard-if not impossible-to deduce.

This puts bitcoin in a comparable category to investment grade corporate bonds, Treasury inflation-protected securities, and to a lesser extent, real-estate, which all tend to be uncorrelated with the stock market.

Based on these two measurements alone, it is unlikely that the price of bitcoin is correlated to the S&P 500-and by extension-the overall U.S. stock market.

Currently, there is not a sufficient amount of data to conclude whether bitcoin responds positively to a bearish stock market.

If bitcoin is not correlated to the stock market, it may make it an excellent addition to a traditional portfolio for diversification.

As an uncorrelated asset, it would serve a different function than gold, which tends to be negatively correlated with the performance of the stock market.