According to a new research published by Standard Chartered, the role of Bitcoin in financial markets is transforming. Bitcoin, traditionally viewed as a hedge against inflation and macroeconomic fluctuations, now exhibits a stronger correlation with technology stocks traded on Nasdaq. A new study prepared by Geoffrey Kendrick, Head of Digital Asset Research at Standard Chartered, asserts that Bitcoin’s (BTC) role in traditional financial markets is evolving, behaving more like a technology stock traded on Nasdaq. The research suggests that Bitcoin serves not only as a hedge against macroeconomic fluctuations but also functions as an investment asset associated with technology stocks on a broader scale. The ROLE OF BITCOIN IS CHANGING
The report published by Standard Chartered highlights the high correlation of Bitcoin’s short-term trading patterns with the Nasdaq Composite index. While historically Bitcoin stood out as a hedge against turbulence in the traditional financial system, it has recently shown a more synchronized movement with US technology stocks. For example, the rise of Bitcoin during the Silicon Valley Bank collapse in March 2023 indicated investor perception of it as a hedging tool, while recent price movements are in parallel with Nasdaq. To test this trend, Standard Chartered created a hypothetical index called “Mag 7B” by replacing Tesla with Bitcoin among the “Fabulous 7” technology stocks, which typically include Apple, Microsoft, Amazon, Meta, Alphabet, Nvidia, and Tesla. The newly formed “Mag 7B” index includes Bitcoin instead of Tesla. HIGHER RETURNS, LOWER VOLATILITY
The study shows that when examining the performance of this new index, it offers both higher returns and lower volatility compared to the traditional “Fabulous 7”. Kendrick mentions that these findings indicate Bitcoin’s positioning as both a technology stock and a hedging tool for traditional financial markets. Asserting that the “Mag 7B” index created by adding Bitcoin in place of Tesla presents a more robust and potentially more profitable investment basket, Kendrick highlights that with strengthening ties to the technology sector, Bitcoin’s role in investor portfolios may change. CORPORATE INTEREST AND FUTURE EXPECTATIONS
The increasing presence of Bitcoin in traditional investment portfolios is garnering interest from institutional investors. Kendrick believes that Bitcoin provides a two-way benefit as both a hedge and a growth asset, which may encourage new capital inflows into Bitcoin. On the other hand, Kendrick anticipates an upward movement for Bitcoin in the short term. He suggests that factors like more favorable regulations on crypto assets in the US and the rebalancing of Nasdaq could support Bitcoin, stating, “Higher Nasdaq will mean higher Bitcoin. Currently focused on the $90,000 level.” Bitcoin saw an increase of over 3.5% on Monday, while the total cryptocurrency market value also rose by 1.5% to reach $2.9 trillion.