These Charts Show Some Interesting Relationships Between Bitcoin and Public Markets

Digital currencies are often seen as an alternative to traditional market investing and many people use it as a hedge against traditional securities and commodities. From that perspective, there is a popular believe that crypto assets are immune to some of the behavior of public markets. That couldn’t be further from the truth. While the correlations between public equities and crypto assets is still being explored, there is no doubt that the digital currency space is impacted by the behavior of public markets.

This week offered a unique perspective to evaluate the relationship between the two market ecosystem. Until now, the raise in cryptocurrencies has coincided with one of the biggest bull markets of the last decade. In other words, we haven’t had a lot of downturns to evaluate how crypto assets react to market turmoil. That clearly changed this week with the plummeting and rebound of all major stock indices across the world. Last night, I collected some data and ran some basic analysis and I thought I’d share some of the results. I am in the process of running more sophisticated pattern detection analysis but even these basic techniques might help to illustrate some correlations between public market and cryptocurrencies.

NASDAQ

Technology investors are an important part of the cryptocurrency ecosystem. The following chart compares the highs and lows of the NASDAQ Composite Index and Bitcoin in the past seven days. As you can see, the correlations remain incredibly stable indicating that both assets traded similarly.

DOW

We applied the same technique to the DOW and, surprise surprise, the results were pretty much the same.

VIX

The Cboe Volatility Index or VIX is a primary market indicator that reflects the 30 day volatility expectation. In recent days, the VIX went crazy spiking over 100% in recent days as reflected in the following chart.

Not surprisingly, Bitcoin’s volatility has also been off the charts as captured by the BTC volatility index.

I hope the following charts illustrate some of the relationships between Bitcoin and public market equities. In the next few days, I will post some more detailed analysis.