Bitcoin and S&P 500 Show Increasing Correlation as Crypto Behaves More Like Equities
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Bitcoin has historically shown low correlation with the S&P 500, but recent years have seen increasing correlation, rising to 0.41 over the past 5 years.
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While the S&P 500 offers more consistent returns, Bitcoin has much higher volatility and potential upside. In 2023, Bitcoin gained 160% while the S&P 500 rose 23%.
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When Bitcoin and the S&P 500 are correlated, it suggests Bitcoin is behaving like a risk-on asset, with investors feeling bullish on both traditional equities and crypto.
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Loose monetary policy boosts both the S&P 500 and Bitcoin by stimulating the economy and encouraging investment. Tighter policy can dampen prices.
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Despite extreme volatility, optimism persists for Bitcoin due to upcoming events like the halving and rising institutional demand, with some predicting prices reaching $150,000.