Correlation with Nasdaq: Bitcoin's 90-day correlation with the Nasdaq 100 has exceeded 0.7 for extended periods. This statistical link demonstrates that macro liquidity, not a unique store-of-value thesis, drives its price. It trades as a high-beta tech stock, not digital gold.
macroeconomics-and-crypto-market-correlation
Blog
Why Bitcoin is Not a Risk-Off Asset (Yet)
Empirical data shows Bitcoin behaves as a high-beta tech proxy, not a monetary safe haven. This analysis breaks down the liquidity drivers, correlation metrics, and structural hurdles preventing BTC from becoming digital gold.
introduction
THE CORRELATION
The Digital Gold Narrative is Broken
Bitcoin's price action is tightly coupled with tech stocks, invalidating its status as a non-correlated, risk-off asset.
Liquidity is the Real Asset: During market stress, capital flees all risk assets, including crypto. The 2022 bear market proved that Bitcoin's volatility is a feature, not a bug, for speculators. True safe havens like U.S. Treasuries appreciate during crises; Bitcoin collapses.
Institutional Custody Isn't Enough: Products like BlackRock's IBIT and Fidelity's FBTC provide access, not insulation. When equity portfolios are liquidated, these ETFs are sold first. The underlying asset's volatility dictates the instrument's risk profile, not the wrapper.
Evidence: The March 2020 COVID crash saw Bitcoin drop 50% in 24 hours while the S&P 500 fell 12%. In Q1 2022, as the Fed signaled rate hikes, Bitcoin and the Nasdaq entered a bear market in lockstep, debunking the decoupling narrative.
key-trends
WHY BITCOIN IS NOT A RISK-OFF ASSET (YET)
Three Data-Backed Realities
Bitcoin's correlation with traditional markets and its unique volatility profile challenge its status as a digital safe haven.
01
The 90-Day Rolling Correlation Trap
Bitcoin's price action is increasingly tethered to tech stocks (e.g., NASDAQ-100) and macro liquidity indicators, not acting as an independent hedge. During market stress, correlations often spike, not diverge.
- Correlation with S&P 500: Historically ranges from ~0.2 to ~0.8, frequently spiking above 0.6 during sell-offs.
- Driven by Common Factor: Both are heavily influenced by Fed policy and global USD liquidity, not BTC's inherent properties.
0.6+
Stress Correlation
90-Day
Rolling Window
02
Volatility Dwarfs Traditional Havens
A true risk-off asset (e.g., U.S. Treasuries, gold) provides capital preservation and predictable negative correlation. Bitcoin's ~80% annualized volatility makes it a price discovery vehicle, not a stability anchor.
- 30-Day Volatility: Typically 3-5x higher than the S&P 500.
- Drawdown Magnitude: Common corrections of -20% to -50% within weeks invalidate short-term 'safe haven' thesis.
~80%
Annualized Vol
3-5x
Vs. S&P 500
03
Liquidity Fragility in Crises
Bitcoin's on-chain settlement finality is robust, but its exchange-traded liquidity is shallow relative to traditional markets. In a true 'flight to safety', bid-ask spreads widen and slippage soars, undermining its utility as a reliable exit.
- Market Depth: The top 10 exchanges often hold less than $500M in actionable bid-side liquidity for a 2% price move.
- Contagion Risk: Exchange failures (FTX, Mt. Gox) and regulatory actions cause systemic liquidity shocks, a non-issue for gold or bonds.
<$500M
Top 10 Depth
2% Move
Slippage Trigger
deep-dive
THE CORRELATION
Liquidity, Not Fear, Drives Price
Bitcoin's price action is dictated by capital flows, not its perceived role as a hedge against traditional market volatility.
Bitcoin is a risk-on asset. Its price correlates positively with the S&P 500 and Nasdaq, not inversely. This correlation breaks the classic definition of a safe haven, which should appreciate during equity sell-offs.
Liquidity is the primary driver. Bitcoin's price moves with global dollar liquidity, measured by the M2 money supply. When central banks inject liquidity, risk assets, including Bitcoin, rise. This relationship is stronger than any narrative-driven 'fear' trade.
The 'digital gold' narrative is aspirational. For Bitcoin to become a true risk-off asset, it requires deeper, non-speculative liquidity pools and integration with traditional finance infrastructure like BlackRock's spot ETF or on-chain Treasury protocols.
Evidence: The 2022 bear market saw Bitcoin fall 65% alongside the Nasdaq's 33% drop, demonstrating its embedded risk-on behavior. Its beta to tech stocks remains significantly higher than its beta to gold.
90-DAY ROLLING CORRELATION
Correlation Matrix: Bitcoin vs. Traditional Assets
Quantifies Bitcoin's price relationship with major asset classes, demonstrating its current role as a high-beta risk-on asset rather than a safe haven.
| Asset / Metric | Bitcoin (BTC) | S&P 500 (SPX) | Gold (XAU) | U.S. 10Y Treasury (TNX) |
|---|---|---|---|---|
Correlation to S&P 500 (90d) | 0.65 | 1.00 | 0.15 | -0.45 |
Correlation to Gold (90d) | 0.10 | 0.15 | 1.00 | 0.30 |
Correlation to U.S. 10Y Yield (90d) | 0.40 | -0.45 | 0.30 | 1.00 |
Beta to Equities (vs. SPX) | 2.8 | 1.0 | 0.2 | -0.5 |
30-Day Volatility (Annualized) | 65% | 15% | 12% | 18% |
Drawdown in 2022 Bear Market | -65% | -25% | 0% | -17% |
Performance in 2020 Liquidity Crisis | -50% | -34% | +4% | N/A |
Inflation Hedge Empirical Proof |
counter-argument
THE MACRO MISMATCH
Steelman: The 'Halving & Adoption' Bull Case
Bitcoin's narrative as a risk-off asset is structurally flawed, relying on a supply shock that is disconnected from traditional market risk signals.
Bitcoin is pro-cyclical. Its price action correlates with tech stocks and high-beta risk assets, not with treasury bonds or the dollar. The 'digital gold' thesis fails during market stress when liquidity flees all speculative instruments.
The halving is a supply shock, not a demand catalyst. Past cycles saw parabolic rallies post-halving, but these were driven by new capital inflows from retail and institutional narratives, not the event itself. The 2024 cycle lacks a comparable onramp catalyst like Coinbase's IPO or the ETF mania.
Adoption is not utility. Corporate treasury adoption by MicroStrategy or nation-state adoption by El Salvador provides narrative fuel, not economic stability. These are voluntary, speculative bets on price appreciation, not a systemic shift in monetary base demand.
Evidence: The 2022 bear market saw Bitcoin drop 65% while the DXY (U.S. Dollar Index) rallied 15%. True risk-off assets appreciate during equity sell-offs; Bitcoin's beta to Nasdaq remains positive.
risk-analysis
BITCOIN'S CORRELATION CONUNDRUM
Why Decoupling Remains Elusive
Bitcoin's price action remains tightly coupled to traditional risk assets, undermining its narrative as a digital gold safe haven. Here are the structural reasons why.
01
The Macro Liquidity Spigot
Bitcoin is a liquidity-driven asset, not yet a fundamental store of value. Its price is dictated by the same global dollar liquidity conditions (Fed balance sheet, interest rates) that drive tech stocks like the NASDAQ-100.\n- High Beta to Tech: Correlations with QQQ often exceed 0.7 during market stress.\n- Institutional On-Ramp: Flows via Coinbase, Grayscale GBTC, and CME futures tie it to traditional capital markets.
>0.7
Correlation to QQQ
$40B+
CME Futures Open Interest
02
Lack of Native Yield
True risk-off assets (e.g., U.S. Treasuries) provide positive carry and capital preservation. Bitcoin's proof-of-work security is a cost center, not a yield engine, making it a pure speculative bet in a high-rate environment.\n- Opportunity Cost: ~5%+ risk-free rate (T-bills) creates a massive hurdle rate.\n- Protocol-Level Passivity: Unlike Ethereum staking or DeFi lending pools, Bitcoin generates no protocol-native cash flow for holders.
0%
Native Protocol Yield
5%+
Risk-Free Rate (T-Bill)
03
Derivatives Dominate Price Discovery
Price is set on leveraged derivatives markets (CME, Binance, Bybit), not by spot accumulation. This creates reflexive, volatility-amplifying dynamics identical to risk-on assets.\n- Futures & Perpetuals: $30B+ in daily volume vs. ~$10B on major spot exchanges.\n- Liquidation Cascades: High leverage (10-100x common) forces correlated sell-offs across crypto during equity drawdowns.
3:1
Derivatives/Spot Volume Ratio
10-100x
Common Leverage
04
The ETF Double-Edged Sword
Spot ETFs like IBIT, FBTC increase accessibility but reinforce traditional market mechanics. They are price-tracking vehicles, not sovereignty tools, subject to creation/redemption arbitrage and market maker hedging that tether BTC to TradFi flows.\n- Arbitrage Lag: Authorized Participants (APs) create/destroy shares based on premium/discount to NAV.\n- Flow Dependency: ETF inflows/outflows are now a primary narrative driver, mirroring equity ETF psychology.
$50B+
ETF AUM
~15 bps
Typical Arbitrage Spread
future-outlook
THE REALITY CHECK
The Path to 'Digital Gold' (If It Exists)
Bitcoin's volatility and correlation to tech stocks disqualify it as a true risk-off asset, requiring fundamental on-chain and market structure changes.
Bitcoin is a risk-on asset. Its 90-day correlation with the Nasdaq has been persistently positive since 2020, spiking above 0.7 during market stress. It trades like a high-beta tech stock, not a safe haven.
True 'digital gold' requires yield. Gold's status is anchored by a massive, liquid futures market and the ability to earn lease rates. Bitcoin lacks a deep, institutional derivatives market and a native, trust-minimized yield mechanism like Ethereum's staking.
The settlement layer is too slow. For institutional treasury management, finality and throughput are critical. Bitcoin's 10-minute blocks and lack of programmability make it inferior to Solana or even Ethereum L2s for moving large, time-sensitive capital.
Evidence: During the March 2023 banking crisis, Bitcoin rallied 40% while gold rose 8%. This was a liquidity-driven, speculative squeeze on CME futures, not a flight to safety. The volatility was 5x gold's.
takeaways
WHY BITCOIN IS NOT A RISK-OFF ASSET (YET)
TL;DR for Portfolio Managers
Bitcoin's price action remains tightly coupled with speculative tech assets, not inversely correlated with equities as a true safe haven should be.
01
The Correlation Problem
Bitcoin's 90-day rolling correlation with the Nasdaq has historically been positive and significant, especially during market stress. It acts as a high-beta tech stock, not a hedge.
- ~0.6 correlation with Nasdaq during sell-offs.
- Liquidates alongside growth portfolios, increasing systemic risk.
- Lacks the negative correlation profile of gold or long-duration treasuries.
~0.6
Nasdaq Correlation
High-Beta
Risk Profile
02
Liquidity & Structural Fragility
The market is dominated by leveraged, speculative capital via perpetual futures on exchanges like Binance and Bybit. This creates reflexive sell-offs.
- ~$25B+ in open interest vulnerable to cascading liquidations.
- Thin order book depth outside major exchanges amplifies volatility.
- No deep, non-speculative buyer of last resort (e.g., a central bank).
$25B+
Futures OI
Reflexive
Price Action
03
The Macro Regime Test
In a true stagflation or deflationary shock, Bitcoin has not proven its store-of-value thesis. Its performance is tied to liquidity conditions (Fed balance sheet) more than purchasing power preservation.
- Fell ~65% in the 2022 liquidity tightening cycle.
- No demonstrated inverse relationship with real yields.
- Adoption as a treasury reserve asset (MicroStrategy, Tesla) is still marginal and pro-cyclical.
-65%
2022 Drawdown
Pro-Cyclical
Institutional Flow
04
Path to 'Risk-Off' Status
For Bitcoin to decouple, it requires structural changes that reduce speculative leverage and increase real-economy utility.
- Deep, regulated spot ETF markets attracting pension/insurance capital.
- Native yield mechanisms (e.g., via Bitcoin L2s like Stacks, Rootstock) creating sticky capital.
- Sovereign adoption as a reserve asset, moving beyond corporate treasuries.
ETF AUM
Key Metric
L2 TVL
Utility Signal
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