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Kansas City Fed on Correlation of Bitcoin

Federal Reserve Bank of Kansas City, DC-Based of Governors, makes up the central bank of the US.

With the spread of the COVID-19 pandemic, Bitcoin has mostly sailed in a critical situation. There are a lot of fluctuations taking place with the Bitcoin which states as a “risk-on” asset rather than “risk-off” assert. At some point of time there is a rise in prices and with the sudden moment the prices fall down like no other. Several leading crypto analysts have addressed that Bitcoin has been showcasing a positive correlation with the S&P 500.

This monitoring has badly surprised the holders of Bitcoins who had expected a time of turmoil that has the world’s central banks ready for virtually unlimited money printing. Moreover, some investors are still not shocked by Bitcoin’s behavior during this crisis since the financial markets have been uncommon during a time of crisis to see all correlations.

The Kansas City researchers state that, according to their analysis, the 10-year Treasury and gold behaved in the stress before and after with the introduction of Bitcoin. The correlation of their regular returns of the S&P between January 1995 to February 2020.

Furthermore, the researchers have found that the 10-year Treasury and gold have negative correlation. With the statistics, correlations with the S&P 500, both assets have the properties of safe havens. It has been measured that Bitcoin has a weak correlation with the S&P 500 during periods of financial crisis. Bitcoin behavior is reflecting as a risk asset rather than a safe haven.

With the conclusion for the 10-year Treasury may be surprising. It was a safe haven from the period of January 1995 to February 2020. Thus, its correlation with the S&P 500 in March 2020 is still figured out to be negative.