Bitcoin Correlation With US Equities at 2-Year Low, Potential Bullish Signal?

According to the crypto market data provider Kaiko, Bitcoin’s correlation with the S&P 500 Index has dropped to a two-year low at just 3%, highlighting the asset’s increasing independence from traditional finance. 

Some experts have argued over the years that such a development could act as a catalyst and push BTC’s price to a new all-time high.

As revealed by Kaiko, the last time Bitcoin’s correlation with the S&P 500 Index stood at 3% was in August 2021.

📈👀 #Bitcoin ‘s correlation with the S&P 500 continued declining in July, hitting just 3% .

👉The last time it was this low was back in Aug 2021. pic.twitter.com/QsklvAsuxY

— Kaiko (@KaikoData) July 26, 2023

It is interesting to observe that the correlation was around 50% at the start of 2023 and well above 35% approximately a month ago.
Given the price increase of the shares of some leading organizations such as Apple, Tesla, and Amazon since the beginning of the year, the S&P 500 has climbed by over 18% YTD. Bitcoin, on the other hand, has performed much better, increasing its USD valuation by more than 75% since the start of 2023.
Prominent figures in the crypto space have maintained that BTC’s decoupling from equities and traditional finance could prompt a price rally for the asset. One such person is the British cryptographer and CEO of Blockstream – Adam Back.
He opined last year that the primary cryptocurrency could skyrocket to $100,000 by the end of 2022 should it decorrelate from stocks.
Nonetheless, bitcoin finished the year at a high correlation with the S&P 500 Index and Nasdaq, whereas its price on December 31 (approximately $16,500) stood far from the predicted figure.
Many BTC proponents have outlined that one of the asset’s biggest merits is its ability to serve as a hedge against inflation. The correlation to stocks (observed during some periods last year), though, has acted as a counterargument to that thesis.
It is worth mentioning that things look quite different this year. Apart from decoupling from the S&P 500, BTC has also defied the banking crisis in the USA that occurred this spring. The asset’s price plunged shortly after the collapse of Signature Bank, Silicon Valley Bank, and Silvergate Bank but later started a brief bull run.