It’s safe to say that Bitcoin has slowly evolved into a macro asset. As such, its relationship with major traditional indices like the S&P 500 (SPX) and the Nasdaq Composite (NDQ) becomes a significant indicator of investor sentiment and use case evolution.
These indices represent vital pillars of the traditional financial system: SPX reflects broader market trends, while Nasdaq is a tech-heavy benchmark closely tied to growth sectors and innovation. By monitoring how Bitcoin interacts with these indices, we can see whether it behaves more as a risk-on asset, correlated to equities, or a hedge, decoupling during times of uncertainty.
Changes in Bitcoin’s correlation with traditional assets reveal shifts in market perception. A strong positive correlation suggests Bitcoin is moving in lockstep with equities, possibly as a speculative asset tied to risk-on behavior. A weakening or negative correlation, however, indicates Bitcoin is being treated as a hedge—akin to gold—against macroeconomic uncertainty, inflation, or geopolitical risks. These shifts can provide valuable context for Bitcoin’s price movements.
Over the past three months, Bitcoin outperformed both SPX and Nasdaq by a wide margin. Bitcoin gained 58.79%, while SPX rose a modest 5.10% and Nasdaq gained 6.10%. This divergence became particularly pronounced after the US presidential election, when BTC surged to an all-time high of over $93,000, leaving traditional indices far behind.
The correlation coefficients between Bitcoin and the indices fluctuated during this period, but both ended in weakly negative territory. Bitcoin’s correlation with SPX settled at approximately -0.17, while its correlation with Nasdaq hovered around -0.17 as well. Before the election, there were brief periods of positive correlation, likely driven by macroeconomic events affecting all markets. However, the post-election period marked a clear decoupling as Bitcoin’s hedge appeal and speculative fervor took center stage.
The weakening correlation shows that Bitcoin is increasingly moving independently of traditional equities. While SPX and Nasdaq reacted to earnings, interest rate expectations, and geopolitical concerns, Bitcoin’s price was driven by narratives of institutional adoption, scarcity, and its role as an inflation hedge.
The 1-month data paints a similar but more concentrated picture. Bitcoin rose 36.52% in just 30 days, compared to a 0.99% gain for SPX and a 1.72% gain for Nasdaq. The post-election rally was the main driver of Bitcoin’s outsized performance, as enthusiasm around its long-term potential overshadowed the relatively cautious movements in traditional markets.
The correlation coefficient during this period shows an even sharper decoupling. Bitcoin’s correlation with SPX fell to -0.35, while its correlation with Nasdaq dropped to -0.17. This suggests that while traditional markets reflected mixed investor sentiment—balancing optimism about economic recovery with concerns over geopolitical risks—Bitcoin was seen as a more straightforward bet on future growth and a hedge against uncertainty.
Interestingly, the correlation with Nasdaq was less negative than with SPX. This could be due to overlapping investor bases between Bitcoin and the tech sector, both of which attract growth-oriented, risk-tolerant capital. However, the overall trend is clear: Bitcoin’s independence is growing, particularly during high-volatility events like the election.
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