Is Bitcoin Disentangling From Its Wall Street Correlation?

The fate of Bitcoin BTC/USD appears to be disengaging from the mood swings of the U.S. stock markets.

The 90-day rolling correlation between the fluctuations in Bitcoin's spot price and the changes in the Nasdaq and S&P 500, two key U.S. equity indices, has dropped to nearly zero.

This is the lowest it has been in two years, as per data compiled by crypto derivatives analytics company Block Scholes, Coindesk reported.

BlockScholes Research Analyst Andrew Melville noted in an email, "It [the correlation] is now at the lowest level observed since July 2021, when BTC was between its twin peaks in April and November."

"The fall in correlation has happened as both assets have retraced losses sustained throughout last year's tightening cycle," he added.

This decreasing correlation with traditional risk assets suggests that crypto traders relying solely on the sentiment of conventional markets and macroeconomic trends might be in for a surprise.

The narrative around the recent filings for spot Bitcoin exchange-traded funds (ETFs) by BlackRock, Fidelity, WisdomTree, VanEck, Invesco and others has infused a sense of optimism in the crypto market.

Since BlackRock's filing on June 15, Bitcoin has seen a return of 25%, undeterred by the stagnant activity in the U.S. stock indices.

Marex Solutions Co-Head of Digital Assets Ilan Solot believes the ETF narrative can be divided into three segments: anticipation of the launch, flows after the spot ETFs become operational and the validation of crypto as an asset class.

Also Read: Binance Under Scrutiny: Australia's Financial Watchdog Investigates Crypto Giant's Derivatives Business

"Investment product flow in coming months could be a litmus test for the latter, so I’ll be watching it closely," Solot stated on Twitter.

Contrary to the bears' expectations, there has been a surge in investor interest in exchange-traded products since June 15.

K33 Senior Research Analyst Vetle Lunde mentioned in a client note on Tuesday, "Globally, BTC ETPs experienced inflows of 13,822 BTC in June, with the inflows kicking in after the BlackRock announcement on June 15."

"The flows have been strong across jurisdictions, with Canadian and European spot ETPs and U.S. futures ETFs all experiencing solid inflows," Lunde added. 

Read Next: Spot Bitcoin ETFs Could Soon See SEC Approval, Suggests Bernstein Analysis

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