Bitcoin’s Declining Correlation With Stocks Revives Its Appeal for Investors: K33 Research

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The correlation of $BTC’s price with the NASDAQ index has fallen to 17-month lows, making an appealing case for the asset as a portfolio diversifier, K33Research reported. sndr_krisztian reports

as central banks globally jacked up interest rates at the fastest pace in decades to combat rampant inflation. The monetary hawkishness knocked down the price of rate-sensitive, risky assets such as stocks and cryptocurrencies.“A perverse focus on growth and wide mania across the financial markets enabled the high correlations,” K33 wrote in the report. “Now conditions have calmed. Hence, BTC may again resume acting as a solid diversifier.

A portfolio with 3% weight in BTC, 58.5% in stocks and 38.5% in bonds has outperformed the classic 60% equities, 40% bonds investment over the years. Even when it’s measured from January 2018, near when cryptocurrency prices entered a two-year bear market, the portfolio that included BTC would have outperformed by 6.9%, according to K33.

“While the considerable price fluctuations may disincentivize investors, a time-tested strategy of active disciplined rebalancing and a minor allocation to BTC has proven to improve the overall risk profile of a traditional portfolio,” K33 wrote.

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