Bitcoin, and crypto assets in general, have become more correlated with tech stocks in recent months, according to research.
Bitcoin appears to have lost its property as a store-of-value asset or inflation hedge. This has been evidenced by its third-quarter performance, which has been highly correlated to U.S. tech stocks.
Messari researcher Kunal Goel posted a chart on Oct. 4 revealing the extent to which Bitcoin markets and tech stocks have fallen in tandem.
In a report on Bitcoin’s performance for the third quarter, Goel said, “Bitcoin largely lost its inflation hedge and store-of-value narratives in the market after falling 72% from ATHs.”
Crypto and tech market tandem
The chart shows that the BTC price and Nasdaq 100 rebase could be almost overlaid perfectly since the beginning of 2022.
Since Jan. 1, Bitcoin has declined 57% from just over $46,000 to current levels of around $20,000. Over the same 9 months, the heavy tech stock influenced Nasdaq 100 has lost 33.5% from 16,500 points on Jan. 1 to below 11,000 by the end of September, according to TradingView.
Granted, Bitcoin’s losses are heavier because it is a far more volatile asset, but the peaks and troughs in the two charts are virtually the same.
Goel noted that since hitting its November 2021 all-time high of $69,000, Bitcoin has fallen 72% amidst a risk-off macro environment. “Instead of a store of value, the price action has been similar to that of a high-beta U.S. tech equity,” he said before adding prices have continued to suffer throughout the Federal Reserve’s conservative regime.
The inflation hedge narrative has taken a big hit this year, exacerbated by institutional selloffs and capitulation from large crypto lending platforms, further contributing to its volatility.
“As such, the asset has yet to “mature” to a lower risk spectrum, even though some institutions did come.”
That said, drawdowns of more than 70% are nothing new for Bitcoin and its brethren, as they have occurred in the previous three market cycles.
By comparison, gold prices have also lost their store of value properties as the commodity has tanked more than 18% from around $2,000 in Q1, 2022, to around $1,630 by the end of Q3.
BTC reclaims $20,000
Bitcoin prices have managed to claw back 2.6% over the past 24 hours, but the asset remains firmly rangebound. At the time of press, it was trading at $20,145, up 5.4% over the past week, according to CoinGecko.
There does not appear to be a short-term end in sight for the consolidation, however, as crypto markets remain unremarkably flat despite the recent devaluation of several fiat currencies around the world.
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