\u201cBitcoin\u2019s correlation with commodities increased throughout the year and started to break off in October \u2014 the increase could potentially be explained by investors\u2019 risk-aversion towards traditional markets given the uncertainties from COVID situations and overall political environments.\u201d<\/em><\/p><\/blockquote><\/figure>\n\n\n\nFurthermore, Bitcoin showed a significant correlation with equity markets in Q1 of 2020. This was because \u201call markets sold off when there was a flight to liquidity\u201d <\/em>during the COVID pandemic. When governments announced financial stimulus packages, prices for BTC, commodities, and equities recovered rapidly, again resulting in a \u201csignificant correlation of these asset classes, which made people brand BTC as a risk-asset, like equities, when there was a flight to liquidity.\u201d<\/em><\/p>\n\n\n\n <\/figure><\/div>\n\n\n\nAccording to CoinMarketCap, the $1,200 stimulus package is positively Bitcoin as an alternative investment solution to hedge against potential inflation. Brian Armstrong, CEO of Coinbase, in April, when stimulus was distributed, revealed that most of the deposits were the same size as the $1,200 stimulus check. This means that instead of spending stimulus money, people were investing in Bitcoin.<\/p>\n\n\n\n
This scenario also explains Bitcoin\u2019s negative correlation with the U.S. Dollar Index (DXY). According to the analysis by CoinMarketCap, \u201c Bitcoin\u2019s correlation with the U.S. Dollar Index (DXY) started to drop and became negative starting in mid-late April 2020,\u201d <\/em>as US Dollar became weaker, while a portion of the stimulus went to Bitcoin and the cryptocurrency market.<\/p>\n\n\n\nThe analysis concludes that Bitcoin’s correlation with traditional assets will break off further and Bitcoin would serve as an alternative solution that offers investors diversification opportunities.<\/p>\n","protected":false},"excerpt":{"rendered":"
Bitcoin has so far outperformed traditional asset and indices, but the correlation with equity markets grew in Q1 of 2020, says CoinMarketCap\u2019s recent analysis. According to a publication of CoinMarketCap on Monday, November 2nd, Bitcoin correlation with traditional assets like Gold and Silver grew throughout 2020 and started to break off in October as the … <\/p>\n
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