Correlation Coming To An End?
Many people, including myself believe that when it comes to to gauging correlation between asset classes, the long-term time frame is the most accurate metric. Bitcoin has been quite strongly correlated to to traditional stocks in recent months and this is to be expected. In a global crisis liquidity becomes scarce and many people are forced to liquidate assets that they had no intention of selling. This does not exclude Bitcoin and it is also important to note that BTC is the most liquid asset class available. There are no trading restrictions, as Bitcoin and alts trade 7 days a week, 24 hours a day.
This could even cause more Crypto assets to be sold off as people are unable to wait until Monday morning in order to receive funds. When a global crisis hits, traditional behavior goes out the window and people do what they have to in order to survive. If one zooms out to view the correlation between Bitcoin and stocks, there is not that much correlation in the longer time frames. The correlation that is so often discussed is that which can be seen on the shorter time frames.
However, even in the shorter time frame Bitcoin has begun to decouple from traditional stocks and even gold. Stocks have been falling lower and yet Bitcoin has been surging quite powerfully to the upside. Currently trading in the region of $13K, Bitcoin could continue to move higher if the current levels of support continue to hold.
This would most likely further confirm a significant decoupling from stocks and establish Bitcoin as the world's uncorrelated, independent store of value. This is what most Bitcoiners envision in regards to Bitcoin, an asset that is not influenced by outside forces but rather dictated by it's own built-in monetary design.
A Strong Decoupling Will Act As A Safety Net
The likelihood of a second market crash is very likely, almost a certainty in the opinions of some and the only silver lining Bitcoin has is a strong decoupling from traditional stocks and assets. If BTC can move on to create enough distance between itself and stocks, this could potentially soften the blow of a second crash.
Bitcoin will suffer in such an event but I believe that a decoupling is able to minimize the loss and bring about an even faster rebound. Regardless of potential outcomes it is very encouraging to see Bitcoin do what it is designed to do and break away from the dead weight of an old and dying dysfunctional system.
Views expressed are my own and should not be interpreted as financial advice.
