Bitcoin closely mirrors tech stocks rather than acting as a market hedge

Standard Chartered released findings indicating that Bitcoin's correlation with the Nasdaq stock market is significant, often surpassing its connection to gold. Currently, this correlation stands at around 0.5, having reached as high as 0.8 earlier this year. On the other hand, Bitcoin's relationship with gold has diminished over time, briefly touching zero and now resting just above 0.2. Geoff Kendrick, the bank's global head of digital assets research, emphasizes that viewing Bitcoin merely as 'digital gold' is misleading as its role in the market is evolving, and its trading patterns align more closely with technology stocks. The correlation with the Nasdaq suggests that Bitcoin could potentially be integrated into a portfolio of large tech stocks, allowing for an increase in institutional investment. With Bitcoin frequently likened to a hedge against traditional financial risks, Kendrick acknowledges that the frequency of the need for such hedges is often rare. However, their findings propose a hypothetical investment index, termed Mag 7B, incorporating Bitcoin with notable tech companies like Alphabet, Amazon, and Microsoft, which has shown to outperform the standard Magnificent 7 index in several instances since December 2017. Investors have been navigating an evolving landscape, where volatility in financial markets, fueled by external factors like tariff threats from the Trump administration, adds complexity to Bitcoin's status. Despite experiencing a decline of around 5% in the year to date, Bitcoin's trends correlate with macroeconomic elements such as money supply growth and the U.S. dollar index. This indicates some resilience and potential for recovery as Bitcoin has demonstrated a positive correlation with M2 growth and a negative connection with the DXY. The continued institutional interest in Bitcoin is reinforced by the asset's dual identity as both a risk hedge and a component of technology-driven investment strategies. As Bitcoin solidifies its presence in investor portfolios, additional applications for the cryptocurrency could attract new capital inflows, especially as institutional adoption rises. This shift towards viewing Bitcoin through the lens of technology investments rather than solely as a hedge represents a significant evolution in how both retail and institutional investors perceive and utilize the asset.