For years, Bitcoin and other cryptocurrencies have been considered independent assets, separate from traditional financial markets. The investment company Grayscale has done research on the data of the last three years, and they've come to the conclusion that independence is no longer so. Half of this year's growth in the price of Bitcoin is said to be caused by the effects of macroeconomic trends. The question is if this message will be negative or positive for the price action.
Since the beginning of the year, the price of Bitcoin has gained more than 80%, and 50% of this growth is due to broader market dynamics. Bitcoin has become more positively correlated with the S&P 500 and other market variables during the COVID-19 period. At its peak in October 2022, the correlation with the index was an impressive 65%. This year, Bitcoin is most correlated with the Nasdaq.
The research also tried to develop a model of how bitcoin would behave in the current conditions. The opinion is that it would show an increase of only 26% this year. That is one third of the growth it actually did. A higher correlation with the market may therefore be seen as positive news for some. This makes it easier to predict the development and future behavior of the price.
However, it also has its cons. Bitcoin is more connected to macroeconomic trends and thus is sensitive to incoming inflation data and the possible reaction of the Federal Reserve System (Fed). Further rate hikes may therefore have a negative impact on Bitcoin, and most probably it will come, since 99.8% of the market participants think so.