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When Bitcoin was first introduced, many people thought one of its benefits would be that it was unrelated to the stock market. Investors hoped Bitcoin would be a suitable hedge – a safe place to protect funds from the volatility of the stock market. However, as the cryptocurrency has grown in popularity, many have started to wonder whether Bitcoin has a correlation to the stock market. Is Bitcoin's price affected by the stock market — and is this a good thing? Explore our guide to learn more about the nature of Bitcoin's correlation to the stock market.
For the first several years of its life, there was almost no correlation between Bitcoin and the S&P 500. Until 2012, Bitcoin prices were very stable, while S&P 500 prices had their usual steady rise with some dips. The very first significant Bitcoin jump, in late 2013 and early 2014, had no corresponding S&P 500 increase. In fact, the stock market dip in late 2016 happened at the same time as a Bitcoin price increase. Bitcoin prices tended to fluctuate rapidly, while S&P 500 price changes were less drastic. Peaks and valleys for Bitcoin and S&P 500 prices showed almost no similarities until 2018 or so.
However, a look at recent Bitcoin vs. stock market charts shows far more correlation. The crypto's value doesn't perfectly mirror the S&P 500 index. However, a comparison of Bitcoin and the S&P 500 does show that there are some relationships. We can tell this by examining how the crypto behaves during volatile S&P price swings.
Over the past four years, Bitcoin has somewhat begun to mimic S&P 500 movements. During the big dips of January 2018, September 2018 and March 2020, Bitcoin prices also dropped. Interestingly, Bitcoin vs. stock market charts show that Bitcoin's drops seem to be even more drastic. While the S&P usually only experiences dips of around 10%, Bitcoin has weathered crashes of over 50%.