Bitcoin and The Stock Market: Are There Similarities?


Markets are volatile right now. Bitcoin (BTC) is fluctuating in price, and stocks aren’t doing much better. They are down around 20 percent this year. Why are both asset classes rising and falling together? Let’s take a look. 

The History of Bitcoin and the Stock Market

During the early days of Bitcoin, stocks and the price of Bitcoin did not move as closely together. For investors, this helped them spread their risk due to Bitcoin moving independently. If stocks fell, that didn’t mean Bitcoin would.

In 2017, that changed. When Bitcoin began to rise and showed signs of becoming one of the best performing assets of the 21st century, some markets began to correlate. When BTC fell, stocks did the same. 

But why did this happen?

Bitcoin and the Stock Market: Why The Correlation?

The major reason stems from the growing popularity of Bitcoin. Investors are now regularly buying it and institutions are making large purchases. That’s driving the link between the two assets.

Before 2017, Bitcoin was an alternative investment. It was not a part of regular portfolios. Most retail investors were not interested in it, and it only appealed to a small section of devoted fans.

However, when BTC hit $1,000, things changed. The media started to cover the coin. The public’s interest grew. Prices exploded from $1000 to more than $18,000 during 2017 due to demand.

At the same time, the stock market rallied. The S&P rose by 21.8% that year

During the pandemic, something similar happened. BTC rose 302% in 2020 while the S&P rose 18.4 percent

In 2021, the correlation appeared even stronger. BTC and SPX tracked each other precisely. 

Becoming an Asset Class 

Bitcoin and the stock market moving similarly may come down to perceptions. BTC became an asset class. Institutions looked at it like bonds, stocks, or real estate. Many companies began offering Bitcoin as part of other financial services, such as offering it as part of ETF futures products, staking it, and Fidelity has plans to offer it in 401(k) plans. Investors started buying and selling BTC to reflect their risk appetite, similarly to stocks.
In a risk-off situation, investors sold both Bitcoin and stocks. In a risk-on situation, they bought both. 

An Opportunity For Miners

For miners, negative Bitcoin price movements affects profitability. However, big drops have happened before. The recent activity of Bitcoin is a result of investor risk appetites. Investors are dumping risk across the board, including stocks and equities. 

Time and time again Bitcoin has shown to be resilient, and miners accumulating now in “business as usual mode” could maximize profits in the future if the price of Bitcoin bounces back like it has previously following a downturn. 

Want more news about Bitcoin? Check back regularly for more updates.


Contact us today and learn how Mawson can design a digital assets management program tailored to the specific needs of you and your enterprise.
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