The Nasdaq has plummeted by ten percent in just a week. The S&P 500 isn’t far behind, down 8.80%, while the Dow has dropped by 7.60% during the same timeframe.
Despite the market volatility — with the VIX reaching a high of 45.60 — Bitcoin has surprisingly risen over 1% on April 4th.
Odd, isn’t it? Bitcoin, usually viewed as one of the riskiest ‘risk-on’ assets, has shown an unusual correlation over the past few weeks.
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Bitcoin’s Historical Performance and Its Correlation with Other Assets
From 2012 to 2023, Bitcoin has consistently been either the highest or lowest performing asset each calendar year — never settling in the middle — according to WisdomTree’s March 2024 report, “Dynamic Correlations: Bitcoin vs. Other Asset Classes.” In nine of those years, Bitcoin outperformed all other assets, but it also faced drastic declines over 60% in years like 2018 and 2022, highlighting its potential for extreme volatility.
Moreover, Bitcoin exhibits a low and fluctuating correlation with traditional assets. WisdomTree’s analysis indicates that its 50-day rolling correlation with the S&P 500 has generally ranged from -0.1 to 0.2; this correlation occasionally spikes but lacks consistency. This suggests that Bitcoin operates independently of equities, reacting differently during periods of market stress — as we observe currently.
“The hardest single thing to understand about correlation is that it is always shifting.” – WisdomTree, 2024
While broader markets are in decline, Bitcoin’s strength today may hint at its developing role as a diversifier during times when traditional assets are closely correlated.
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Bitcoin vs. S&P 500: A Year of Performance Comparison
As of Friday, Bitcoin’s performance over the past year shows an increase of roughly 25%, while the S&P 500 is down 7%. This indicates that had you invested in Bitcoin a year ago, you would have gained, unlike the S&P 500.
Source: Godel Terminal (BTC vs SPX – Year % Change)
While the information presented here is fairly straightforward and doesn’t go into a deeper technical analysis, it’s essential to recognize. The common reaction would be to sell Bitcoin during downturns, perceiving it as one of the riskiest assets, yet this data suggests a different narrative in recent times.
