Key facts:
The trading volume of bitcoin in rubles quadrupled with the Russian invasion.
In the last month, against a 14% appreciation of bitcoin, S&P 500 fell 6%.
The recent evolution of the markets to the war in Eastern Europe has had different effects on the bitcoin and cryptocurrency market, compared to traditional markets. While the bitcoin market’s initial reaction to the Russian invasion of Ukraine was bearish, along with traditional equities, divergences have emerged between those two markets in recent days. Which favors the narrative of bitcoin as a haven asset and could benefit from an increase in its price.
This Tuesday, March 3, are shown some pointers of the divergence between the behavior of bitcoin and the S&P 500 index, which represents the behavior of the shares of the main traditional companies.
The chart below shows that the correlation between bitcoin and the S&P 500 index grew with slight fluctuations from 0.35 in mid-December to a high of 0.55 last week. A decrease to 0.45 is then perceived, which reflects that there is less coupling between bitcoin and traditional stocks.
During 2021, the correlation between bitcoin and the S&P 500 remained predominantly negative. As of the end of January 2022, however, a growth in the correlation is observed, as can be seen in the following graph. It can be seen that, while the price of bitcoin (candles) has increased in recent days, the S&P 500 (gold) has decreased and the correlation between the two (blue) has become more negative.
On January 30, a maximum of said correlation of 0.8 is observed, while on February 24 the correlation becomes negative. Negative values of this parameter indicate divergent behavior of the variables involved. The value of the correlation at the time of writing this article is -0.63.
Bitcoin moves away from traditional assets
A Kaiko report, commented by CriptoNoticias, had warned on January 10 that the correlation of bitcoin with Nasdaq and S&P 500 had reached its maximum value since July 2020. As reported by CriptoNoticias, bitcoin has also coincided in its rise in recent days with a rebound in commodities, or raw materials, which reinforces its perception as a reserve of value.
The reversal of this coupling trend between bitcoin and conventional stocks it seems to have been accentuated in part as a consequence of the Russian invasion of the Ukraine. Sanctions against Russia have led to an increase of the use of bitcoin in that country, while this cryptocurrency is being used intensively in Ukraine to receive funds from all over the world.
Both the Ukrainians and the Russians are considering bitcoin as a haven asset in the face of increasing financial controls, but also as a means of saving. In Binance stats, the daily trading volume of the bitcoin-ruble pair (BTCRUB), which is usually below $5 million, shot up to almost $18 million on February 24, as seen in the chart below. .
Another indicator of the divergence between conventional stocks and bitcoin can be seen if we consider the behavior of the markets in the last month. In that time, bitcoin has appreciated 14.38%, while the S&P 500 has fallen 3.97%. On the other hand, technology shares grouped in the Nasdaq index have declined 6.09%.
We could be in the midst of a narrative shift for bitcoin if the decoupling with traditional assets persists, strengthening its role as a haven asset and store of value.