Standard Chartered Bank has highlighted that Bitcoin's correlation with the Nasdaq Index is stronger than its correlation with gold, suggesting potential benefits for investors who view it as a large tech stock. According to the bank, Bitcoin's current correlation with the Nasdaq is approximately 0.5, having reached nearly 0.8 earlier this year. Meanwhile, Bitcoin's correlation with gold has been declining since January, currently standing slightly above 0.2.
Jeff Kendrick, Global Head of Digital Asset Research at Standard Chartered, noted that Bitcoin's short-term trading is closely linked with the Nasdaq Index. This correlation suggests that Bitcoin could be considered part of the large tech stock basket. If included, it could lead to more institutional buying, as Bitcoin would play multiple roles in investment portfolios.
Bitcoin is often seen as "digital gold" and a hedge against risks in the traditional financial sector. Kendrick maintains that Bitcoin still serves these purposes, but the demand for such a hedge is relatively rare in practice.
Standard Chartered has created a hypothetical index called "Mag 7B," which includes Bitcoin with the "seven major tech stocks" (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) but excludes Tesla. Since December 2017, the Mag 7B index has outperformed the Mag 7 index by about 5%. Over seven years, the Mag 7B index has outperformed the Mag 7 index in five years, with a notable advantage in 2022.
Kendrick also mentioned that since President Trump's inauguration, Bitcoin's volatility-adjusted trading pattern has been similar to Nvidia's. Since January 20, Bitcoin and Nvidia have fallen by 16% and 12%, respectively. In contrast, Tesla has dropped by 36%, with trading patterns more akin to Ethereum, which has fallen by 38% since January 20.
Investors can consider Bitcoin both as a hedge against traditional finance and as part of their tech investment portfolio. As Bitcoin's role in global investment portfolios solidifies, its multiple uses are expected to attract new inflows, especially as Bitcoin investments become more institutionalized.
