Bitcoin (BTC) fortunes are no longer tied to sentiment in US stock markets.
The 90-day moving correlation of changes in Bitcoin’s spot price with changes in Wall Street’s tech-heavy stock index, the Nasdaq, and the broader index, the S&P 500, has fallen to near zero. That’s the lowest reading in two years, according to data from crypto derivatives analytics firm Block Scholes.
“It [the correlation] is now at its lowest since July 2021, when BTC was between its two highs in April and November,” said Andrew Melville, research analyst at BlockScholes, in an email.
“The drop in correlation has occurred as both assets have recouped the losses they suffered during last year’s tightening cycle,” Melville added.
The dwindling correlation with traditional risk assets means crypto traders who focus solely on traditional market sentiment and macroeconomic developments may face disappointment.
Recent spot bitcoin exchange-traded fund (ETF) filings by BlackRock (BLK), Fidelity, WisdomTree (WT), VanEck, Invesco (IVZ), and others have brought optimism to the crypto market.
Since BlackRock’s report on June 15, bitcoin has returned 25%, ignoring the fluctuation-limited activity of US stock indexes.
According to Ilan Solot, co-head of digital assets at Marex Solutions, the ETF narrative could be like this broken down broken down into three parts: forerunners in adoption, flows after the ETFs go live, and validation of crypto as an asset class.
“Investment product flow over the coming months could be a litmus test for the latter, so I’ll be watching that closely.” Solot tweeted.
To the dismay of bears, investor interest in exchange-traded products has increased since June 15th.
“Global BTC ETPs saw inflows of 13,822 BTC in June, with inflows starting following BlackRock’s announcement on June 15,” Vetle Lunde, senior research analyst at K33, said in a note to clients on Tuesday ETF narrative discussed the impact. “Inflows were strong across all jurisdictions, with Canadian and European spot ETPs and US futures ETFs all seeing solid inflows.”
While the ETF narrative is at the forefront for now, some macroeconomic factors, such as potential pressures on fiat liquidity, still deserve attention, analysts told CoinDesk.
Bitcoin was changing hands at $30,830 at press time, according to CoinDesk data.