- According to data compiled by Bloomberg and based on five years of price movements, Bitcoin has moved more than one standard deviation from its average (in either direction) just five times this year.
- Nevertheless, Bitcoin and the Nasdaq 100 still remain positively correlated, with the tight linkage shared by these two asset classes still near an all-time-high, according to Bloomberg.
While many investors may be turned off by Bitcoin’s volatility, high-flying tech stocks, which it has long been associated with, have been far more volatile of late.
According to data compiled by Bloomberg and based on five years of price movements, Bitcoin has moved more than one standard deviation from its average (in either direction) just five times this year.
Whereas the tech-heavy Nasdaq 100 index, has moved one standard deviation from its average a whopping 12 times, with the only other time that has happened in the last five years in 2020, during the onset of the pandemic that roiled equity markets.
Part of the reason of course is that tech stocks have been attracting eye-watering valuations for some time now, especially high-profile loss makers, whereas cryptocurrencies like Bitcoin, although the subject of speculation, do not hone themselves to existing valuation matrices.
While growing concern that monetary policy tightening by major central banks will dampen demand for risk assets like Bitcoin, the highest level of U.S. inflation in four decades is also feeding into the narrative that the cryptocurrency could provide a hedge against price rises as well and may be contributing to its recent ascent even as tech stocks tumble.
It helps that much of the leverage that fueled the speculative bets which saw Bitcoin rise to an all-time-high of close to US$69,000 last November have also been more or less flushed out of the system, whereas leverage is still abundant in the Nasdaq 100.
So far this year, Bitcoin’s 8% decline compares favorably with the Nasdaq 100’s 13% fall and the tech-heavy index has proved far more volatile than Bitcoin, even though the latter trades far more frequently.
Nevertheless, Bitcoin and the Nasdaq 100 still remain positively correlated, with the tight linkage shared by these two asset classes still near an all-time-high, according to Bloomberg.
