Since its creation, Bitcoin has been considered by many as “digital gold”, given that the cryptocurrency is durable and scarce like the precious metal.
Unlike Bitcoin, however, gold has a strong record of rallying its price in times of financial turmoil. Bitcoin has yet to build a reputation of resilience in the face of crisis.
As a matter of fact, in recent months, the correlation between the price of the cryptocurrency and the equity index S&P 500, a benchmark for the global stock market. The data suggests that this bond is stronger now than it has been ever before.
In the month of June, the one-month correlation between S&P 500 and Bitcoin rose to a record-high of 66,2%. These numbers have been established by the crypto research firm Skew, which has been monitoring the data since April 2018.
Bitcoin’s correlation with the renowned equity index, however, is historically inconsistent. The one-year correlation has risen to a new height of 37%. In this context, it is important to note, that correlation between 30% and 50% is indicating a somewhat weak correlation between the variables.
In the first half of March, in the wake of the COVID-19 crisis, Bitcoin’s price plummeted from $10,000 to $3,867. A similar plummeting has been observed on global equities, due to coronavirus fears. In the following months, Bitcoin’s price spiked back to $10,000, as the S&P 500 witnessed its fastest recovery on record.
This is largely due to the fact, that the US Federal Reserve, as well as other central banks around the globe, have been injecting stupendous amounts of liquidity in their economies to counter the financial crisis brought about by the coronavirus. As of the end of June, Fed`s balance sheet numbers counted $7.01 trillion – a 67% difference compared to the $4.24 trillion recorded early in March.
All this financial support for the stock markets might be the reason why the correlation with the S&P 500 is not all bad news for Bitcoin. Many investors remain unhinged by this data.
The so-called “HODLers” – the long-term holders of Bitcoin – people who have stored their cryptocurrency for at least 12 months, have risen up to the record amount of 20.3 million in the month of June. Up from the previous record of 19.52 million reached in May this year. The data, shared by IntoTheBlock, also shows that the number of holders of Bitcoin is up 22% on a year-on-year basis, even though the price of the cryptocurrency is down 25% for the same period.
