Bitcoin has a positive correlation with the stock market for years now, which means that Bitcoin typically moves up when the stock market does and dumps when the stock market does. This is not news.
Yet that does not stop us from dreaming about a decoupling, when the relationship with stocks turns negative and Bitcoin does its own thing.
A bad decoupling in 2022 - The fall of FTX
Last year the relationship between Bitcoin and the stock market (S&P 500) did turn negative once. Unfortunately for us, this was a 'bad decoupling'. More specifically, in November/December of 2022, Stocks rallied off the lows as the Dollar (DXY) lost strength, while Bitcoin moved in the opposite direction because of the FTX crash.
The first decoupling in 2023 is a 'good decoupling'!
Now, in 2023, we have our first moment of 'good decoupling' with the S&P 500 as the correlation turns negative again. While the stock market is correcting with three red weeks in a row, Bitcoin pumped hard to $25K. This has not happened for a long time.
A visualization of both events
Both events are visualized in the chart below. This chart shows the price of Bitcoin with an orange line and the correlation in blue below, which ranges between 1 (perfect positive correlation, both move up or down together) to -1 (perfect negative correlation, one moves up and the other stays stagnant or moves down).
I highlighted the FTX moment and the current moment in red.
Bitcoin's price (orange line) and correlation with S&P 500 (blue part below); Source: Will Clemente
So why are we decoupling from the stock market right now with Bitcoin performing well and stocks doing poorly? Is it a catch up after the fall of FTX or a result of better macro economic conditions which favor risky assets? Or perhaps something else?
Either way, great news!
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