Bitcoin’s performance is more closely tied to the Nasdaq than to gold, according to Standard Chartered, which suggests investors consider it another large-cap tech stock.
Currently, Bitcoin’s correlation with the Nasdaq hovers around 0.5, though it reached 0.8 earlier this year. Meanwhile, its correlation with gold has declined since January, briefly touching zero, and now sits just above 0.2.
“Bitcoin trading is highly correlated to the Nasdaq over short time horizons,” noted Geoff Kendrick, Standard Chartered’s global head of digital assets research, in a Monday note. “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 often viewed as “digital gold,” a hedge against risks within the traditional financial sector. While Kendrick acknowledges this role, he observes that “in reality … the need for such hedges is very infrequent.”
Standard Chartered developed a hypothetical index called “Mag 7B,” which incorporated Bitcoin with the Magnificent 7 tech stocks – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla – while excluding Tesla. According to Kendrick, “Mag 7B has outperformed Mag 7 by about 5% over the period since December 2017. 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 also pointed out that bitcoin has traded in a similar volatility-adjusted manner to Nvidia since President Trump’s inauguration. Both are down, with Bitcoin at 16% and Nvidia at 12%, since January 20. Comparing other stocks, Tesla, with a 36% decline in the same timeframe, 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 has fallen about 5% this year, with recent market volatility stemming from Trump’s tariff threats. However, investors anticipate some relief in the second quarter, given Bitcoin’s persistent correlations: a positive correlation with money supply growth (M2) and a negative correlation with the U.S. dollar index (DXY).
—CNBC’s Michael Bloom contributed reporting.
