Bitcoin is more closely correlated to the Nasdaq than it is to gold most of the time, and investors could benefit from viewing it as another big tech stock, says Standard Chartered.
Bitcoin’s correlation with the Nasdaq is currently at about 0.5, after it approached 0.8 earlier this year, according to the bank. Meanwhile, its correlation with gold has been falling since January, touching zero at one point, and is now just above 0.2.
“Bitcoin trading is highly correlated to the Nasdaq over short time horizons,” Geoff Kendrick, Standard Chartered’s global head of digital assets research, said in a note Monday. “This Nasdaq correlation leads to the idea that bitcoin could be included in a basket of large tech stocks; if it were included, the implication would be more institutional buying as BTC would serve multiple purposes in investor portfolios.”
Bitcoin is frequently viewed as “digital gold” and a hedge against risks facing the traditional financial sector. Kendrick said he still sees the flagship cryptocurrency serving that purpose but that “in reality … the need for such hedges is very infrequent.”
Standard Chartered created a hypothetical index dubbed “Mag 7B,” in which it added bitcoin to the Magnificent 7 tech stocks — Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla — and removed Tesla.
“Mag 7B has outperformed Mag 7 by about 5% over the period since December 2017,” he said. “On a calendar year basis, Mag 7B outperformed Mag 7 in five out of seven years, albeit by a very small margin in 2022. Mag 7B’s relative returns are decent on both an absolute basis (averaging around 1% a year above Mag 7) and a calendar-year basis.”
Kendrick said bitcoin has been trading in a similar volatility-adjusted fashion to Nvidia since President Trump’s inauguration. They’re down 16% and 12%, respectively, since Jan. 20. Meanwhile, Tesla, which has lost 36% in the same period, is trading more like ether (down 38% since Jan. 20).
“Investors can view bitcoin as both a hedge against [traditional finance] and as part of their tech allocation,” Kendrick said. “Indeed, as BTC’s role in global investor portfolios becomes established, we think that having more than one use will bring fresh capital inflows to the asset. This is particularly true as bitcoin investment becomes more institutionalized.”
Bitcoin is down about 5% for the year after Trump’s tariff threats in recent weeks have brought new volatility to the market. Investors are expecting relief in the second quarter, however, given bitcoin’s two of its most persistent correlations: its positive correlation with money supply growth, also known as M2, and its negative correlation with the U.S. dollar index, or DXY.
—CNBC’s Michael Bloom contributed reporting.