In a recent report by Standard Chartered, Bitcoin has been likened to a typical Wall Street trade, largely associated with tech stocks and treated as such. It appears that the cryptocurrency is used when beneficial and discarded when it’s not.
The bank reported on Monday that the correlation between Bitcoin and the Nasdaq is currently around 0.5, and earlier this year, it had surged to 0.8. Concurrently, the cryptocurrency’s relationship with gold has drastically plummeted. Since January, the correlation with gold has been reduced to nothing at some point, and currently, it just exceeds 0.2.
Geoff Kendrick, the global head of digital assets research at Standard Chartered, highlighted in the report that the short-term trading of Bitcoin is significantly correlated with the Nasdaq. This tendency, according to Kendrick, is why Bitcoin should be perceived as another substantial tech trade.
Adding to his insights on the issue, Kendrick suggested, “If it were included [in a tech basket], the implication would be more institutional buying as BTC would serve multiple purposes in investor portfolios.”
This perspective isn’t novel. Wall Street’s perception of cryptocurrency is continually changing. One month, it’s viewed as a tech play; the next, it’s seen as a “hedge against the traditional system.” However, Kendrick didn’t dismiss the hedge idea but highlighted that “In reality… the need for such hedges is very infrequent.”
Alongside this, Standard Chartered has introduced a new index named Mag 7B. The index includes the Magnificent 7 tech stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — but replaces Tesla with Bitcoin.
According to Kendrick, since December 2017, Mag 7B has outperformed the regular Mag 7 by about 5%. This has occurred in five out of seven calendar years, although the lead in 2022 was marginal. On average, the Mag 7B returned approximately 1% more annually than the Mag 7. Kendrick pointed out that the gains weren’t huge but were consistent.
Moreover, Kendrick compared the volatility of Bitcoin to Nvidia over an extended period. Since January 20, when Donald Trump resumed office, Bitcoin has decreased about 16%, and Nvidia has dropped 12%. Meanwhile, Tesla has plummeted 36%, similar to ether, which has fallen 38% over the same period.
In Kendrick’s view, “Investors can view Bitcoin as both a hedge against [traditional finance] and as part of their tech allocation.” He noted that Bitcoin’s role in portfolios is becoming more established and that this dual purpose might attract more investment, particularly as it’s being increasingly adopted by institutions.
With the revival of Trump’s tariffs, Bitcoin has fallen around 5% for the year. Standard Chartered suggested that this is not surprising, given Bitcoin’s tendency to react to macroeconomic triggers. The bank identified two specific patterns: Bitcoin generally increases when the money supply (M2) expands and decreases when the U.S. dollar index (DXY) rises. Both these relationships remain active.
As of press time, Bitcoin was valued at exactly $87,722. Traders now eagerly await relief in Q2, hoping that Bitcoin will rebound as the market gains more clarity on tariffs. However, the White House has kept the markets in suspense. U.S. stock futures remained flat on Monday night, March 24, following a day when major indexes soared due to hopes that Trump would moderate his plans.
Standard Chartered’s report provides a comprehensive analysis of Bitcoin’s status in the financial market. It also sheds light on the cryptocurrency’s complex relationship with traditional financial instruments and indices. This insight could prove invaluable to investors looking to diversify their portfolios with digital assets.
