Bitcoin's correlation with tech stocks jumps to highest level since August

Bitcoin was lumped in with other speculative investments during the run-up of the U.S. Federal Reserve’s last tightening cycle, slumping on expectations higher interest rates would damp the appetite for risk. Now with optimism growing again that borrowing costs could soon be heading lower, advocates of the biggest cryptocurrency are saying its more akin to high growth assets such as the shares of technology companies.

The token has been trading as such as of late. The 90-day correlation coefficient of the digital currency and the tech-heavy Nasdaq 100 index reached 0.46 this week, the highest level since late August. A coefficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions. After the Fed began raising its target rate on overnight loans between banks in early 2022, the correlation jumped to more than 0.8, the highest since the digital asset burst onto the mainstream consciousness. 

“People are refocused on crypto as a growth asset or an asset that represents network value,” said Joshua Lim, co-founder of trading firm Arbelos Markets. “The ability of it as a technology and transfer of value mechanism, and that means that it’s gonna be more correlated to other assets that are also pretty growthy like Nasdaq, tech equities, those sorts of things.”