Bitcoin’s Correlation to Nasdaq and S&P 500
A lot of data, analysis and research can be used when investing. The effort and time spent on this side is aimed at reducing the risk and increasing the profit. Even today, many research companies disclose a lot of data using various analysis methods.
The Relationship Between Bitcoin and Other Investment Vehicles
Many people now know that Bitcoin has a decentralized structure. This decentralized structure can establish certain relationships with other investment instruments. Those who want to invest can diversify their investments in many areas. Many investment instruments such as stocks, commodities, bonds, bills, real estate, etc. in the world stock exchanges constitute a good example of this situation. This situation brings about the formation of a relationship between them.
Individuals or companies that will invest can also make different transactions between many investment vehicles. For example; An investor who buys stocks on Borsa Istanbul can also diversify his investments by purchasing a crypto asset. Sometimes the area of investment is the stock exchanges, sometimes there are times when the majority of them invest in crypto money. In such cases, when it is desired to make an analysis, a statistical relationship emerges.
The study of this relationship with Bitcoin and other investment tools is called “correlation” in statistics. The science of statistics provides guidance for financial markets on many issues. The resulting results offer many conclusions about the markets to its users. Correlation will be a concept that we will focus on in the continuation of this article.
What is this correlation?
Financial markets make great use of the science of “Statistics” during their analysis and research. If we talk about correlation, it is a statistical concept used to see if there is a regular relationship between two concepts. While one of the variables is increasing, the changes in the other variable give us the correlation. Correlation values range from -1 to 1. The resulting correlation value gives the direction of the relationship between them and whether it is strong. If we do not look at it from a statistical point of view but add an interpretation, the correlation shows us whether the increase experienced on one side is in a positive or negative direction on the other side.
Thanks to this statistical concept, detailed information about the market can be obtained and offers results that add more value to the analysis.
Bitcoin’s Relationship Between Nasdaq and S&P500
Before the relationship between Bitcoin and the two indices, I would like to give information about these two indices. The Nasdaq is a stock exchange in the United States where technology stocks are traded. We can also call it the world’s technology stock exchange. When we consider the number of companies involved in it, the transaction volume is quite high. It has a very active place on world trade.
The S&P 500 is again located in America like the Nasdaq. It is located in one of America’s top 500 companies. If we consider the importance of America in world trade and the size of companies, it is known to investors and occupies an important place commercially.
, which has been in harmony with these two indices since the beginning of the pandemic, is now more in harmony than ever. The details of this harmony reinforce the theses of those who defend Bitcoin’s place among investment tools.
Bitcoin continues to be at low correlation levels with traditional markets since the day it emerged. Recently, however, the correlation between Bitcoin and these two indices seems to be on the rise. As a result of the researches, “Bitcoin’s Nasdaq and S&P 500 Correlation” shows us that it has reached the highest level of the last 18 months.
As a result of the research conducted by the Kaiko company, it has shown us that there is a strong positive correlation of 0.61 and 0.58. This data shows us that Bitcoin closely follows stocks. The fact that it shows the same slope with two strong indices seems to be a risk reducing factor for investors.
We will see together what will happen in the future.
