Bitcoin's relationship with U.S. stocks has evolved significantly, with its correlation to the S&P 500 increasing from 0.17 over the past decade to 0.41 in the last five years. This trend reflects a growing alignment between the cryptocurrency and traditional equity markets, suggesting that Bitcoin is becoming more 'tamed' by Wall Street. Notably, during the FTX incident on November 11, 2023, Bitcoin exhibited a negative correlation of -0.76, but this shifted to a positive correlation of 0.57 in January 2024, indicating a dynamic response to market events [70dde79c].
The influence of institutional investors is becoming increasingly prominent, with approximately 1.17 million bitcoins now held in exchange-traded funds (ETFs). This institutional interest is reshaping Bitcoin's market dynamics, as it becomes a more attractive investment tool for traditional investors. Currently, out of a total supply of 21 million bitcoins, 19.9 million have already been mined, with companies like Microstrategy holding about 2.12% of the total supply [70dde79c].
Additionally, the correlation between U.S. Treasuries and the S&P 500 is approaching 1.0, further indicating a shift in how various asset classes are interlinked. As Bitcoin continues to gain traction among institutional investors, its potential to become a staple in investment portfolios is being recognized, especially in light of favorable macroeconomic conditions and political support for cryptocurrencies [70dde79c].
Looking ahead, the policies of political figures, such as Donald Trump, could further influence Bitcoin's adoption and integration into mainstream finance. As the cryptocurrency landscape evolves, the question remains whether Bitcoin will solidify its position as a distinct asset class or continue to mirror the behaviors of traditional stocks [70dde79c].