The Correlation of Bitcoin Trading and Technology Stocks

Bitcoin trading is increasingly aligned with technology stocks, especially during macroeconomic fluctuations. Institutional investors now treat Bitcoin as a risk-on asset, leading to simultaneous declines and rebounds alongside traditional stocks. Institutionalisation has reduced Bitcoin’s volatility significantly, making it a more stable investment. Future expectations remain positive although some volatility is anticipated, particularly with upcoming regulatory changes and the entry of larger institutional investors.

Bitcoin’s trading patterns have increasingly correlated with tech stocks, particularly during macroeconomic events. Following Trump’s tariff announcements, both Bitcoin and major indices like the S&P 500 and Nasdaq saw significant declines, mirroring each other’s movements. Adrian Fritz from 21Shares highlights that this synchronisation is a result of institutional investors treating Bitcoin as a risk-on asset, thus subjecting it to the same market forces as traditional equities.

During times of economic uncertainty, Bitcoin faces pressure alongside other risk assets. For instance, a global flight to safety triggered a simultaneous drop of 15% in Bitcoin and major stock indices. However, positive news such as tariff suspensions led to a rally in Bitcoin and stocks alike, resulting in gains of 8.2% and 9.5%, respectively, post-announcement. This indicates Bitcoin’s responsiveness to broader market narratives rather than purely cryptocurrency fundamentals.

Experts suggest that Bitcoin has become less volatile due to institutionalisation and the introduction of more regulated financial instruments. Dovile Silenskyte notes that Bitcoin’s 90-day annualised volatility has decreased significantly over the past five years. This shift is attributed to increased investment from professional asset managers and the establishment of products like spot Bitcoin ETFs, which enhance market dynamics and reduce gap risks.

As institutional participation grows, Bitcoin’s market structure has improved, leading to tighter bid-ask spreads. Max Shannon emphasised that Bitcoin’s continuous trading contributes to liquidity and stability. While expectations for Bitcoin prices remain optimistic, particularly under a pro-crypto administration, traders should prepare for volatility amidst potential opportunities. Experts foresee Bitcoin maintaining its growth trajectory over the next 12 to 18 months, despite acknowledgments of inevitable price fluctuations.