Bitcoin vs. Macro
Comparing Bitcoin to the S&P 500
In the present cycle, when it comes to analyzing Bitcoin, delving into the macro environment has become an essential aspect. In the past cycles, investors couldn't trade Bitcoin futures and options in traditional finance. Bitcoin has gained wider acceptance as a risk-on asset and is now more likely to be included in traditional finance portfolios. Since Bitcoin is now seen as a risk-on asset it makes the most sense to compare it to equities, or even better an index of the 500 largest companies listed, the S&P 500.
In this newsletter, I have three new charts that I want to share with you, all of them now live available in the Bitcoin Strategy Platform! The first pair of charts detail the correlation and trends of Bitcoin when compared to the S&P 500. The final chart is crucial as it provides a warning signal of potential further decline in the macro environment. It is essential to monitor this as a potential recession could have an impact on Bitcoin.
In the first chart we look at the 40-Day correlation of Bitcoin vs. S&P 500. In the previous cycle, the correlation spent an almost equal amount of time in both the green and red zones. However, since this cycle (marked by the 3rd Halving), Bitcoin has developed a strong positive correlation with the S&P 500. Most time is now spent in the green zone except for a few spikes that are related to severe news events that happened in the Bitcoin space.
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In the second chart we can see how Bitcoin’s price momentum — shown by the RSI — moves in line with the S&P 500. Both seem to have made a bottom around an RSI value of 40.
Now the most important and final chart.