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Bitcoin could lose its diversification status as correlation with stocks increases


Published on 2025-01-14 21:21:08 - FXStreet
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  • Bitcoin's price has shown a rising correlation with the stock market in the past year following similar reactions to macroeconomic data. The launch of Bitcoin ETFs may have played a major role in the rising positive correlation. Bitcoin risks losing its status as a safe haven and diversification asset if the stock market correlation persists.

The article from FXStreet discusses the increasing correlation between Bitcoin and traditional stock markets, particularly the S&P 500, which has led to concerns about Bitcoin losing its status as a diversification asset. Historically, Bitcoin was viewed as a hedge against inflation and a safe haven during economic downturns, similar to gold. However, recent data indicates that Bitcoin's price movements are now more closely aligned with stock market trends, especially following the introduction of Bitcoin-related financial products like ETFs. This shift suggests that Bitcoin might be behaving more like a risk asset, influenced by the same economic factors that affect stocks, such as interest rates and investor sentiment. The article highlights that this change could reduce Bitcoin's appeal as a tool for portfolio diversification, as investors might not achieve the risk mitigation they seek by including Bitcoin in their investment mix.

Read the Full FXStreet Article at:
[ https://www.fxstreet.com/cryptocurrencies/news/bitcoin-could-lose-its-diversification-status-as-correlation-with-stocks-increases-202501150200 ]
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