According to Standard Chartered, Bitcoin has a stronger correlation to the Nasdaq than it does to gold most of the time, suggesting that investors might benefit from considering it akin to a major tech stock.
Currently, Bitcoin’s correlation with the Nasdaq stands at approximately 0.5, having reached around 0.8 earlier this year. In contrast, its correlation with gold has seen a decline since January, dropping to zero at one point, and now rests just above 0.2.
“Bitcoin trading shows a significant correlation with the Nasdaq for short time frames,” noted Geoff Kendrick, the global head of digital assets research at Standard Chartered, in a recent note. “This correlation with the Nasdaq suggests Bitcoin could be considered within a portfolio of major tech stocks; its inclusion could lead to increased institutional buying, making BTC fulfill multiple roles for investors.”
Often termed “digital gold,” Bitcoin is seen as a hedge against various risks within the traditional financial system. Kendrick acknowledged that while Bitcoin still serves this hedging purpose, in practice, “the necessity for such hedges is quite rare.”
Standard Chartered has proposed a theoretical index known as “Mag 7B,” which incorporates Bitcoin alongside the Magnificent 7 tech stocks—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—while excluding Tesla.
“Since December 2017, Mag 7B has surpassed Mag 7 by approximately 5%,” Kendrick explained. “On an annual basis, Mag 7B has outperformed Mag 7 in five out of seven years, albeit with a minimal margin in 2022. Its relative returns remain commendable, averaging roughly 1% higher than Mag 7 annually.”
Kendrick observed that Bitcoin has been trading with volatility levels similar to Nvidia since President Trump took office. Both assets have declined by 16% and 12%, respectively, since January 20, while Tesla has decreased by 36% in the same timeframe, exhibiting behavior more akin to ether, which has dropped 38% since January 20.
“Investors can see Bitcoin as both a safeguard against traditional finance and as a component of their technology allocation,” Kendrick said. “As Bitcoin’s role in global investor portfolios becomes more defined, we believe its varying utilities will attract new capital inflows, particularly as investment in Bitcoin becomes more institutionalized.”
Currently, Bitcoin has fallen approximately 5% this year due to recent tariff threats from Trump that have injected new volatility into the market. However, investors are hopeful for relief in the second quarter, considering Bitcoin’s two consistent correlations: a positive correlation with money supply growth (M2) and a negative correlation with the U.S. dollar index (DXY).
—Reporting by CNBC’s Michael Bloom.
