Crypto and traditional markets – Bitcoin’s monthly return on almost all assets

The correlation to oil fell further, so that Bitcoin and oil are now 40 percent anticorrelated. Bitcoin’s volatility has dropped slightly, while its monthly return is higher than any other asset except gold.

What good are Bitcoin and the strongly correlated crypto market as uncorrelated assets? Are the traditional markets still decoupled from the crypto market? And how high is Bitcoin’s volatility?

Size correlation and volatility are particularly important for institutional Bitcoin formula investors

A low correlation with traditional markets such as the S&P500, the DAX or the Dow Jones would confirm that the Bitcoin formula crypto market could be interesting for institutional investors. It would be helpful for greater portfolio diversification. Another monitor is volatility: high volatility and the associated risk deter institutional investors.

Since the beginning of November, we have been monitoring Bitcoin’s performance compared to traditional markets. We are therefore looking at last month’s correlation, a moving correlation, a moving volatility and a moving return. The last three values are calculated for each day on the basis of the last 30 days. Since the correlations within the crypto market are very similar and BTC is currently the most interesting for institutional investors, we focus largely on the Bitcoin price.

With a respectable rebound, further price losses at Bitcoin, XRP and Ethereum could be avoided last year. The volatility is thus back again, with the sideways movement of Bitcoin and XRP leading to a decline in them. The coupling of the top 3 crypto currencies with each other hardly differs in the meantime:

Correlation: crypto currencies vs. traditional market

Bitcoin’s correlation to the classic values has changed significantly since week 51 last year. The coupling to oil is strongly negative. The same can be said for the coupling to the American indices S&P 500 and Dow Jones:

Due to these negative linkages, the average correlation among all the markets considered is lowest for Bitcoin.

The linkages to gold and the DAX are strongest, while the correlations to the S&P 500 and Dow Jones indices and the correlation to oil are negative:

Bitcoin volatility falls slightly
Bitcoin’s volatility remains significantly higher than that of its other assets. Even that of oil fades against Bitcoin’s volatility. On the positive side, however, volatility is falling somewhat:

The monthly yield is currently at zero, but it has increased considerably. Although the monthly yield has not yet been able to beat gold, it is now above the three indices S&P 500, DAX and Dow Jones as well as above the monthly yield of oil:

Even if Bitcoin’s volatility were to remain so high, this would at least be an uncertainty that investors can expect. A certain stability can therefore be seen. As was the case in week 51 last year, Bitcoin will once again be attractive for institutional investors.