Is Bitcoin’s correlation with Gold and S&P500 real?

Sep 2, 2020 Forex News

Analysts constantly talk about the correlation between Bitcoin, gold and the S&P 500. This is a good marketing variant for traders, which allows them to diversify portfolios and hedge their risks.

However, if you check the correlation between Bitcoin and these two assets, you will notice that the correlation is gradually decreasing.


Source: Skew

Also on the annual chart provided by Signalplot, it can be seen that the correlation between Bitcoin, gold and the S&P500 is almost zero or fluctuates around zero, both in the positive and in the negative direction.


Source: Signalplot

The figure below shows the level of correlation of Bitcoin. To do this, the weekly returns of all major ETF offerings over the past 5 years (1500+) were taken into account.

All ETFs with over USD 10 million were reviewed here. The best interpretation here is that the correlation between Bitcoin and other financial assets is low, ranging from -0.1 to +0.1. That's lower than gold and the S&P 500 compared to the past 90 days.


If you also analyze the price chart of Bitcoin, gold and S&P500, you can see that the correlation is enhanced only in such scenarios as a collapse of the world market or geopolitical situations. However, this is not reflected in the ETF correlation.

Thus, Bitcoin is a great addition to an asset portfolio. Adding Bitcoin helps hedge the portfolio against risks associated with other assets.

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