Correlation of Markets

NEU Blockchain Organization
7 min readJan 25, 2023

Written by NEU Blockchain Alpha Research:

Chandler Otterbein (Executive Vice President)

Joan Yang (Co-Director of Expansion at WiBlock)

Cooper Duschang (Vice President of R&D, Co-Director of Governance)


With the spread of the global Coronavirus pandemic (COVID-19), the relationship between Bitcoin and equity markets has expanded. In 2020 the cryptocurrency market had a market capitalization of $826.6 million. During the 2021–2028 period this market is expected to grow at a compound annual growth rate of 11.1%. Cryptocurrencies offer a number of benefits over traditional forms of money. This includes faster, cheaper, and more secure transactions, as well as the opportunity to interact with decentralized finance applications and smart contracts. Despite the significant applicative potential and growing adoption of these digital assets, both cryptocurrency and the traditional markets have experienced a decline in value in 2022. No one market is significantly outperforming the other, suggesting that there may be a significant correlation between the two. To test this hypothesis, this article examines a variety of macroenvironment and overarching industry themes that may be entwining the growing cryptocurrency market with traditional financial markets.

Market Crypto Adoption:

Despite the recent bear market, global adoption of cryptocurrencies remains well above the levels that preceded the 2020 bull market. Consistent institutional investment, partnerships with cryptocurrency projects, and development on popular blockchains show there is a flood of new users with capturable value. Those who invest in cryptocurrency during times of price growth tend to stay even when prices decline, allowing the ecosystem to consistently grow across market cycles.

Number of bitcoin and ethereum transactions with price action. Despite bitcoin and ethereum’s drop from All-Time Highs, transfer counts in the respective blockchains have not increased significantly, supporting the conclusion that users are not increasing withdrawals and are continuing to use these blockchains.

Companies are investing in cryptocurrency in order to diversify and take advantage of benefits such as faster, decentralized, transparent, secure, and reliable transactions. The adoption in those high remaining closing prices portray the trend of the market. For example, Tesla purchased $1.5 billion worth of Bitcoin in 2021 for more flexibility to further diversify and maximize returns on their cash. In another example of cryptocurrency adoption, nearly 3,000 Chipotle restaurants across the U.S. now accept 98 cryptocurrencies as payment through the chain’s partnership with Flexa. Other companies are likely to follow suit adopting cryptocurrency usage and contributing to the growth of the market.

Number of Active Bitcoin Addresses. Despite seeing a decline from highs in active address count on a daily basis, the yearly trend has shown an overall increase in the usage of the Bitcoin Blockchain.

Current Market:

Bitcoin has been trading steadily around $17,000. Cryptocurrency prices remain depressed with Bitcoin down more than 70% from its all-time high from nearly a year ago.

Bitcoin / U.S. dollar price action from Jan 2020 to present.

Similarly, the S&P 500 has seen recent decline, down from its own all-time high by over 22.5%. The traditional markets have not receded as much as the cryptocurrency markets; however, there are a variety of factors that affect both markets and are reason to examine the correlation between traditional indexes and stocks, and large cryptocurrencies.

Current Macro Environment:

Both cryptocurrencies and traditional risk-on asset markets reflect depressed valuations along with worrisome economic conditions. High inflation, the Federal Reserve’s interest-rate policy, the U.S. dollar’s strength, and the Russian invasion of Ukraine have all affected various aspects of both traditional and innovative markets.

The annual inflation rate is 6.5% for the twelve months leading up to December 2022. This general increase in prices and the fall of purchasing power is a significant factor that market players are taking into account. The Fed has been significantly raising interest rates, making it more expensive to borrow money inorder to combat inflation. As of January 17, 2023 the federal funds rate is 4.3%, one of the highest interest rates in over 10 years. This is a drastic change from the frothy low interest rate economy associated with the last bull market. The war between Russia and Ukraine is yet another factor influencing the current market downtrend. This conflict has had global ripple effects on prices for energy, food and other commodities. The U.S. Bureau of Labor Statistics recently reported a Consumer Price Index increase of 6.5% (Over the 12 months ending December 2022 before seasonal adjustment), accounting for major changes in areas including Food at home index up 11.8%, the index for electricity up 14.3%, and the energy index up 7.3%. Ultimately, this conflict has created hurdles and cost inefficiencies across the value chain, making it more difficult for businesses across the globe to generate profit.

To combat some of these economic problems, the Federal Reserve is establishing interest rate hikes in an attempt to reset the economy. By raising the cost of borrowing money, the central banks are suppressing the demand for goods and services. Historically, interest rate hikes tighten financial conditions, causing credit spreads to fall, stock and equity prices to fall, and the strength of the U.S. dollar to increase.

Federal Reserve Economic Data U.S. Personal Savings Rate.

Despite rapid inflation, the personal savings rate data shows that investors are not holding onto the U.S. Dollar. However, the performance of equity and cryptocurrency markets shows that investors are also not flocking to those locations. Both markets are considered risk-on assets and investors and not increasing their personal savings, but are currently looking at risk-off assets to invest in.

Market Correlations:

Correlation Comparison of Coin Metrics Bletchley Index 10 Even Weight with the S&P 500. CMBI10E indexes the top 10 cryptocurrencies by market cap and shows returns using an even investment distribution strategy. Chart shows a 50-day moving average.

Prior to 2022, the top 10 cryptocurrencies were relatively uncorrelated with the S&P 500 and characterized with significant volatility. However the increasing participation of traditional financial institutions in the cryptocurrency market led to a change in this trend. Traditional institutional participation not only influenced the significant growth of the crypto ecosystem in the last bullish investment cycle, but increased the correlation of the top 10 cryptocurrencies and the S&P 500 to the highest level ever recorded with these cryptocurrencies trending similarly with stocks against volatility. The relative immunity to broader macro conditions that cryptocurrency once maintained, has significantly diminished.

Market Price Action YTD: SPX & NDQ vs. Top 5 crypto assets by market cap.

When looking at the price action between the SPY, NDQ and the top five cryptocurrencies in the current market downtrend, it is apparent that cryptocurrencies follow the same market trend as the traditional market and experience an amplified movement. Despite the significant adoption of cryptocurrencies and their promise going forward, this market is not exempt from the same factors.

Market Price Action: SPX & NDQ vs. Top 5 crypto assets by market cap.

In the last uptrend, the top crypto assets appreciated in value significantly more than traditional assets compared to the dollar. The cryptocurrency markets’ seemingly leveraged movements are representative of their speculative nature and market size. Currently, cryptocurrencies are associated with growth tech stocks and high volatility. A lot of this volatility is a result of the market size delta. The total size of the cryptomarket is $981 billion as of January 15th, 2023 while the total market cap of the S&P 500 is 32 trillion as of January 15th, 2023.

Bitcoin price correlation coefficient comparison with three FAANG stocks.

Looking at Bitcoin’s price correlation with three FAANG stocks, we see similar trends in the duration of specific correlations. Meta Platforms (NASDAQ: META) has only had an inverse correlation with Bitcoin from February 2015 to February 2016. Apple, Inc. (NASDAQ: AAPL) has experienced a few negative correlations with bitcoin in 2013, 2015 to 2017, and a few months since 2019. Alphabet, Inc. (NASDAQ: GOOGL) Class A Common Stock has experienced negative correlation in 2012, 2015, and 2019.

Despite occasionally experiencing negative correlations between Bitcoin and various large cap tech stocks, the positive correlation has been apparent for longer periods of time.

META Correlation:

  • Periods Negative: 12 months
  • Average Negative Correlation over sum of Months = -0.521
  • Periods Positive: 96 months
  • Average Positive Correlation over sum of Months = 0.682

AAPL Correlation

  • Periods Negative: 30 months
  • Average Negative Correlation over sum of Months = -0.656
  • Periods Positive: 100 months
  • Average Positive Correlation over sum of Months = 0.433

GOOGL Correlation:

  • Periods Negative: 13 months
  • Average Negative Correlation over sum of Months = -0.205
  • Periods Positive: 117 months
  • Average Positive Correlation over sum of Months = 0.635


It is evident that the cryptocurrency market offers significant value, however this does not make it exempt from the same factors that influence traditional markets. Cryptocurrency prices are highly correlated with growth tech stock performance within the traditional market. Cryptocurrency and the traditional markets are highly correlated in terms of market trends. The same factors that affect the traditional markets affect the cryptocurrency market. Due to their speculative nature and a significantly smaller market capitalization, crypto assets experience an amplified movement correlated to the trend of the traditional market.

Written By NEU Blockchain Alpha Research:

Chandler Otterbein (Executive Vice President)

Joan Yang (Co-Director of Expansion at WiBlock)

Cooper Duschang (Vice President of R&D, Co-Director of Governance)



NEU Blockchain Organization

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