Lately, the price of Bitcoin has shown record levels of correlation with traditional markets and on July 9 the correlation between the S&P 500 and BTC reached a new historical peak.
Skew data shows that the one-year correlation reached 0.38 on Thursday, July 9, and this came after the metric had reached new highs earlier in the week.
The correlation with traditional markets has been growing steadily lately, with new consecutive historical peaks being reached in one year. Skew’s data also shows that the 1-month figure also reached its historical peak of 0.78 on Wednesday, but has since fallen to 61.5.
Bitcoin’s correlation with gold is weakening, says a new report from Kraken
While the price of Bitcoin has shown a growing correlation with the stock market, the same cannot be said for gold, which has surpassed USD 1,800 to set a new peak not seen since 2011.
A recent report from Kraken’s research department found that the correlation with the precious metal has been declining. Bitcoin’s 30-day continuous correlation also reached a four-month low of -0.49, a level well below its annual average of 0.24.
Is the correlation a sign that Bitcoin is maturing?
The correlation between Bitcoin and the traditional stock market grew after the coronavirus outbreak and the March 12 collapse to $3,750. A recent Cointelegraph research report suggested that this trend could end after the halving, but the exact opposite happened. This is possibly due to the continuing economic consequences of COVID-19.
While a strengthening correlation between Bitcoin and the equity markets is said to be a sign that this asset class is maturing, the nature of Bitcoin’s unregulated derivatives makes it prone to upward and downward contractions.
3 reasons why the price of Bitcoin could collapse if the U.S. stock market crashes
Some analysts have suggested that Bitcoin’s correlation with traditional markets may indicate that BTC is increasingly represented in a wider range of traditionally structured portfolios, and this would be a sign that adoption is continuing to occur.
Is Bitcoin pricing on the verge of a correction?
With halving and all the hype around it, the price of Bitcoin seems to have flattened out. The digital asset reached a record low volatility, with the 10-day realized volatility reaching the 0.2 mark, a low not seen since November 2018.
Monthly Bitcoin volume trading into fiat or stablecoin
The monthly volume of Bitcoin traded in fiduciary coins or stablecoins. Source: CryptoCompare
The decrease in Bitcoin volatility also occurs in conjunction with the decline in trading volumes, and recent data shows that the volume of the BTC-USDT and BTC-USD trading pairs fell by 56% and 44% in June.
Bitcoin investors are up even when the Bitcoin price is below $10,000
As the price continues to find resistance at the USD 9,300 level, the shift from a strong downward correction continues to increase. For this reason, traders are looking at USD 9,500 while the short-term Bitcoin price needs to break higher. Otherwise, the risk of the price falling below the USD 8,000 level increases.
This trend can be seen in all cryptosystems and spot derivatives. In June, derivatives volumes fell by 35.7%, the lowest figure in 2020, and spot volumes fell by 49.3%.
The low volumes, low volatility, strong correlation with stocks and a declining correlation with gold seem to bring a bearish outlook to the Bitcoin price, especially as other safe haven assets are performing well.