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Bitcoin [BTC], Gold, S&P 500 and a case of the widening correlation

  • Gold and S&P 500 showed signs of improvement as BTC’s price continues to struggle
  • Correlation gap at its highest since the FTX crash, with the same contributed to by the Silvergate news

Over time, the degree of correlation between the traditional market and the crypto-market has shifted. Both open questions are how much the gap widened and what caused the prevailing correlation.

Read Bitcoin (BTC) Price Prediction 2023-24

The crypto-SPX correlation is the relationship between the price of Bitcoin or Ethereum and the S&P 500 index – A standard measure of stock market performance in the United States. Gold’s price change is added to that of the S&P 500 to get a better insight into the divergence. The price trends of conventional assets and cryptocurrencies are compared to determine whether they follow a similar pattern.

The present state of correlation

According to a new report by Santiment, the S&P 500, Gold, and cryptocurrency prices are no longer moving in sync. Although cryptocurrencies like Bitcoin and Ethereum continued to struggle on March 6, the study indicated that Gold and the stock market saw some improvement.

Source: Santiment

The S&P 500 had started to rebound as of March 2 on the daily timeframe chart. The recovery came after several weeks of a downward trend, also visible on the chart.

The graph demonstrated that since its recovery started on March 2, it hiked by over 3%. It was selling at $4,059, up about 0.16% at press time. A weak bull trend was also indicated by its Relative Strength Index line as it crossed the neutral line to the upside.

S&P 500 price move

Source: TradingView

And yet, over the same period, a look at BTC’s charts revealed that it has been battling to bounce back after its nearly 5% loss on March 3. It soon gained marginally, with the crypto trading at about $22,500.

The Relative Strength Index (RSI) line was below the neutral line, indicating that it has continued to struggle. 

Bitcoin (BTC) price movement

Source: TradingView

What the charts mean for crypto-market correlation

The current price difference between the two asset classes is what these two charts on the same timeframe have been able to show. Additionally, it demonstrated that the difference intensified following BTC’s drop on March 3. Generally, a drop in the price of BTC usually impacts the price of almost most cryptocurrencies. 

The Silvergate episode

Silvergate, a crypto-friendly bank, has been in the spotlight this past week due to its failing health. There were reports that the bank has changed its stance on cryptocurrencies. The change was in response to the growing scrutiny and hazy rules surrounding digital assets. As a result of the news, several associated projects and exchanges severed their ties with the bank. It fueled widespread panic as it underlined the departure of a major institutional player.

The broader crypto-market’s cap took a significant knock due to the fear, uncertainty, and doubt (FUD) that followed the Silvergate incident. 

Crypto market cap

Source: CoinMarketCap

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The present correlation breach between traditional assets and the crypto-market is the largest since the FTX collapse. The same is evidenced by Santiment and the aforementioned charts. 

Although investors in digital assets are crossing their fingers for better times, those who own both asset types appear to have a more diversified portfolio right now.

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