Bitcoin’s (BTC) fortune is no longer tied to sentiment in the US stock markets.
The 90-day rolling correlation between changes in bitcoin’s spot price and changes in Wall Street’s technology-heavy stock index, the Nasdaq, and the broader index, the S&P 500, has fallen to near zero. That’s the lowest in two years, according to data tracked by crypto derivatives research firm Block Scholes.
“It [the correlation] is now at the lowest level seen since July 2021, when BTC was between its twin peaks in April and November,”[ads1]; Andrew Melville, research analyst at BlockScholes, said in an email.
“The correlation drop has occurred as both assets have followed the losses incurred through last year’s tightening cycle,” Melville added.
The declining correlation with traditional risk assets means that crypto traders who focus solely on traditional market sentiment and macroeconomic developments may face disappointment.
The recent spotbitcoin exchange-traded fund (ETF) filings from BlackRock (BLK), Fidelity, WisdomTree (WT), VanEck, Invesco (IVZ) and others have brought optimism to the crypto market.
Since BlackRock’s June 15 filing, bitcoin has returned 25%, ignoring the range-bound activity in the US stock indexes.
Per Ilan Solot, co-head of digital assets at Marex Solutions, the ETF narrative can be broken down in three parts – ahead of the launch, floats post-the-spot ETFs go live and validation of crypto as an asset class.
“Investment product flows in the coming months could be a litmus test for the latter, so I will be watching closely,” Solot tweeted.
To the dismay of the bears, investor interest in exchange-traded products has increased since 15 June.
“Globally, BTC ETPs experienced inflows of 13,822 BTC in June, and the inflows started after the June 15 BlackRock announcement,” Vetle Lunde, senior analyst at K33, said in a note to clients on Tuesday, discussing the impact of ETF- narrative. “Flows have been strong across jurisdictions, with Canadian and European spot ETPs and US futures ETFs all experiencing solid inflows.”
While the ETF narrative is currently in the driver’s seat, there are some macroeconomic factors, such as potential fiat liquidity pressures, that still require attention, analysts told CoinDesk.
Bitcoin changed hands at $30,830 at press time, per CoinDesk data.