Are Bitcoin and Stocks Correlated?

In this video, I discuss whether or not Bitcoin is correlated with the U.S. stock market.

If you look at returns, Bitcoin and the stock market are only loosely correlated. But because Bitcoin and the stock market (as measured by the S&P 500) are cointegrated, one must instead look at price correlation between the price of Bitcoin and the price of the S&P 500. Following Plan B's analysis, I conclude that Bitcoin and the stock market are indeed both cointegrated and correlated, with a very high R-squared of 95%.

This makes sense, since both the stock market and Bitcoin are increasingly driven by Fed money printing, quantitative easing, and the debasement of the US dollar. The more the Fed prints, the higher both the stock market and Bitcoin should go.

According to Plan B's regression equation, Bitcoin can be viewed as a levered version (416x) of the S&P 500, with only 100% downside. Thus a very small allocation to Bitcoin should be able to give an investor equivalent exposure to a stock index fund.

The Fed's balance sheet, the US stock market, and Bitcoin should continue to rally as the Fed continues to sterilize the US current budget deficit, as well as massive future entitlement spending.

Not investment advice! Consult a financial adviser.

Correlation and correlation coefficients:
https://en.wikipedia.org/wiki/Correla...

https://en.wikipedia.org/wiki/Correla...

Bitcoin correlation using returns, not prices:
https://www.blockchaincenter.net/cryp...

Bitcoin and stocks are correlated (using price, not returns) and cointegrated:
  / 1273202818476892160  

US debt clock:
https://www.usdebtclock.org/

Watch the Fed's balance sheet grow:
https://fred.stlouisfed.org/series/WALCL

Whenever stocks go down, the Fed has to prop them up:
  / 1272591758715650054  

Treasury borrowing exceeds tax receipts for the first time:
  / 1270788733038706688  

Plan B Bitcoin stock to flow papers:
  / 100trillionusd  

Matthew Kratter is the author of the Amazon best-seller "A Beginner's Guide to the Stock Market":
https://www.amazon.com/Beginners-Guid...

If you like my teaching style and would like to learn more about investing and trading stocks, options, and futures, be sure to check out my online courses here:
https://www.trader.university/join

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#Bitcoin
#Stocks


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