After years of claiming a stronger correlation between stocks and bitcoin (BTC), there was a divergence between the two in May, as BTC fell significantly more than stocks.
The so-called decorrelation between bitcoin and stocks (primarily the U.S. S&P 500 Index) has caught the community’s attention this month, with BTC down nearly 25% and the S&P 500 down just over 2% since the beginning of May.
Bitcoin is marked on the chart with a blue line, while the S&P 500 is marked with an orange line.
As Eugene Ng, a cryptocurrency entrepreneur and former head of business development for Asian cryptocurrency exchange Gemini, wrote, the decorrelation between cryptocurrency and stocks is likely due to the redemption of funds, which should stop on the evening of May 27 when stock markets in the United States close.
Ng also noted that the U.S. markets will close on Monday for Memorial Day and it usually takes 1-2 days for funds to send fiat to liquidity providers.
His view echoes the conclusion of a Bloomberg article, which argues that bitcoin tends to fall when U.S. stock markets are open, while it usually rises when they close.
In fact, all of bitcoin’s declines over the past month have occurred when U.S. markets were open.
This signals to us that the recent decline in bitcoin was more about investors getting out into cash and selling assets more broadly, rather than a bitcoin-specific trend.