“Bitcoin, the torchbearer of cryptocurrencies, weaves its strong digital threads into the fabric of the financial world. However, some fibres appear bound more tightly than others. Hence, three assets pose themselves considerably in sync with bitcoin behaviour: crypto-specific stocks, precious metals, particularly silver, and surprisingly, passive and active equity funds, and bonds.
A crucial question that arises, are the existing correlations concrete enough for future predictions? Examining the ties of Bitcoin with these financial assets, various reports opine that the answer is slightly nuanced.
Among the crypto-specific stocks showing close correlation to BTC are MSTR, COIN, and RIOT, indicated by their near-1 90-day correlation coefficient for the past several months. Notably, these stocks show a higher performance streak than Bitcoin this year, alongside greater volatility. The reasonable rationale could be these companies’ significant Bitcoin holdings. For instance, MSTR outshines any public company with a whopping 152,333 Bitcoins.
However, viewing this as an unchangeable fixture might be a little premature, considering crypto-specific stocks’ correlation is affected by their Bitcoin holdings, volatile by nature.
Now, coming to precious metals–silver, the less privileged sibling among precious metals, surprisingly outshines gold in mimicking Bitcoin’s price shifts since 2019. According to a November 2022 report, silver’s correlation coefficient with Bitcoin stands at 0.26 compared to gold’s 0.15. Although, due to silver’s inherent volatility, this connection can quickly shift gears.
Finally, passive and active equity funds and bonds also present an unexpected correlation. Remarkably, growth funds display a more substantial link to cryptocurrencies than value funds, probably due to their speculative corresponding nature.
Despite these findings, Bitcoin’s correlations aren’t a paranormal crystal ball predicting future behaviour to a tee. Bitcoin’s notorious price swings are known to flip the correlations on its head unexpectedly.
Therefore, it is pertinent to remember that such retrospective correlation might shed some light on the previously trodden path, but the future path still evolves and unwraps unprecedented surprises. Every investment involves a level of risk, hence readers must exercise their own caution when deciphering these numbers.”