The inverse correlation between Bitcoin and US stocks and gold after the FTX incident

In the era of turbulent digital currency market, the FTX incident was like a heavy bomb, instantly shaking the entire financial ecology, especially the relationship between Bitcoin and traditional assets. The collapse of FTX triggered a complex interaction between Bitcoin prices and US stocks and gold prices, which is worth in-depth exploration. By analyzing these changes, we will reveal the new role of Bitcoin in the current economic environment and how investors can adjust their strategies in this environment.

The occurrence of the FTX incident made many people realize the fragility and uncertainty of the cryptocurrency market. As one of the world's largest cryptocurrency trading platforms, FTX's sudden collapse not only shocked the entire cryptocurrency market, but also caused widespread panic. According to market data, after the incident, the price of Bitcoin fell rapidly, and at the same time, the US stock market also experienced violent fluctuations. However, it is noteworthy that over time, the correlation between Bitcoin and US stocks began to decrease significantly, and even showed a negative correlation trend. This phenomenon has caused investors to think deeply about what caused this change?

Before in-depth analysis, we must first understand the relationship between Bitcoin and traditional financial assets. As an emerging digital asset, Bitcoin was initially regarded as a tool to hedge against inflation, or even "digital gold." However, with the FTX incident, this concept began to change. Many investors regard Bitcoin as a high-risk asset, especially when the market is turbulent, investors tend to sell Bitcoin to avoid risks. This behavior has led to a gradual weakening of the correlation between Bitcoin prices and US stocks, and even a negative correlation in some periods.

Take November 2022 as an example. After the FTX incident, the price of Bitcoin fell rapidly from nearly $20,000 to $15,000, while the US stock market also fluctuated sharply during the same period. In the face of uncertainty, many investors choose to transfer funds from the high-risk Bitcoin market to more stable assets such as gold and treasury bonds. This capital flow further exacerbates the inverse relationship between Bitcoin and US stocks.

In this process, gold has performed particularly well. As a traditional safe-haven asset, gold often attracts a large amount of capital inflows when the market is turbulent. After the FTX incident, many investors chose to buy gold to protect their wealth, leading to an increase in gold prices. This phenomenon highlights the attributes of Bitcoin as a risky asset, especially when market uncertainty increases, investors are more inclined to choose traditional safe-haven assets such as gold.

In addition, after the FTX incident, regulators have significantly increased their attention to the cryptocurrency market. Governments around the world have stepped up their regulation of cryptocurrency transactions, a change that has undoubtedly had a profound impact on the stability of the Bitcoin market. With the gradual introduction of regulatory policies, investors' confidence in the Bitcoin market has been hit, leading to increased price volatility. This lack of confidence has not only affected Bitcoin's market performance, but has also further deepened the negative correlation between Bitcoin and U.S. stocks.

Against this backdrop, investors' psychological expectations have also changed. After the FTX incident, many investors began to re-examine the value of Bitcoin, especially its nature as a digital currency. In contrast, the volatility of the U.S. stock market is more affected by economic fundamentals, and investors tend to transfer funds to more stable assets when faced with uncertainty. Such market behavior has gradually weakened the connection between Bitcoin and U.S. stocks, and even in some cases has shown a negative correlation trend.

It is worth noting that the impact of the FTX incident is not limited to short-term market fluctuations. In the long run, the occurrence of the incident may change investors' views on Bitcoin and even affect the future development of the entire cryptocurrency market. As attention to Bitcoin decreases, many investors may choose to shift funds to traditional assets, such as gold and U.S. stocks. This flow of funds may further exacerbate the negative correlation between Bitcoin and traditional assets.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Coin Circle (120Btc.com) News: Since 2020, Bitcoin has been positively correlated with the booming U.S. stock market most of the time. As the U.S. Federal Reserve's monetary tightening policy intensified and the U.S. stock market cooled, Bitcoin prices also shrank. Even after the LUNA and 3AC incidents, Bitcoin showed a certain positive correlation with U.S. stocks.

However, after the FTX bankruptcy and reorganization incident that shocked the world, the correlation between Bitcoin and U.S. stocks began to reverse sharply. As of press time, the correlation coefficient between Bitcoin and S&P500 was -0.65, Nasdaq was -0.52, and gold was -0.84.

According to The
Block statistics, over the past 12 months, the 30-day correlation coefficient (Pearson) between Bitcoin and S&P500, Nasdaq Composite Index, and gold has been positively correlated most of the time, except for gold; but in early November, after FTX's bankruptcy and reorganization, the price of Bitcoin fell sharply from the level of US$20,000 to the current level of US$16,000, returning to the price in December 2020. This also caused the correlation coefficient of Bitcoin and other assets to quickly fall into negative correlation.

 Overall, it is a cyclical fluctuation

Overall, the correlation between Bitcoin and US stocks and gold has not shown a long-term and continuous correlation in the same direction, but has fluctuated periodically over time. How long the subsequent effects of the FTX incident will affect the cryptocurrency market remains to be seen.