While it is sometimes called digital gold, the price action of dominant cryptocurrency shows that its positive relationship to stocks is stronger. It is now possible that Bitcoin will move in line with the stock market’s prices.

Bitcoins correlation coefficient with the S&P 500 stock market index, which tracks the performance of 500 large companies listed on the US stock exchanges, reached 0.49 or the highest levels since October 2020, says data from market analytics Arcane Research.

Bitcoin sits almost in the middle, meaning that it is essentially mid-point of the scale. It measures how strong the relative movement between crypto and stocks. This scale has values between 0-1, where 1 means that there is strong correlation.

“Bitcoin’s correlation to the S&P 500 has only been higher for five days in BTC’s history, showing that the current correlation regime is unprecedented in BTC’s history,” the company stated.

During the pandemic, Bitcoin and US stocks moved closer together.

They have acted quite similarly amid Russia’s war in Ukraine, regulatory uncertainty in China and the US central bank’s recent decision to raise interest rates.

Why you should care

Higher correlation with stocks signals that Bitcoin is moving further from acting like gold, which is traditionally considered the safest investment asset or the “safe-haven” in time times of inflation and financial uncertainty.

Moving away from gold can make assets more volatile. Bitcoin has been classified as a high-risk asset by Bank of America (NYSE:). Risk assets can be described as extremely volatile.

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