Is Bitcoin ultimately an "risk-hedging hybrid" independent of the traditional system, or has it gradually been incorporated into the mainstream asset pricing framework?
Author: ChandlerZ, Foresight News
At the beginning of 2025, the global capital market is in a state of fire and ice. Recently, the spot gold price has repeatedly hit new highs. As of February 16, the COMEX gold futures price once surged to $2,968 per ounce, with the largest increase of nearly 10% so far this year, just one step away from the $3,000 mark.
After breaking through the $100,000 high, Bitcoin has continued to fluctuate in the range of $90,000 to $110,000, with a sluggish performance this year that is at odds with its new identity as a safe-haven asset. This volatility not only exposes the differences in the pricing logic of the two types of assets, but also points to the global capital's re-calibration of the risk scale under the "Trump 2.0 era".
Bitcoin VS Gold: From Hedging Narrative to Functional Differentiation
The evolution of the correlation between Bitcoin and US stocks, gold reflects the drift of its identity recognition in the process of financialization. Measured by the correlation coefficient between Bitcoin and traditional assets, its correlation shows significant dynamic changes.
Gold, as a traditional safe-haven asset, has a relatively complex relationship with Bitcoin. From long-term data, the correlation between Bitcoin and gold shows obvious instability, frequently fluctuating between positive and negative, with the correlation coefficient being mostly negative in the early days when Bitcoin was seen as a "digital alternative" to gold. However, in the market turmoil after 2022, the two have often shown synchronized trends. The correlation has tended to be positive after the late 2024, but the volatility is still significant.
This contradiction stems from the differences in their attributes: the hedging function of gold relies on its physical properties and historical consensus, while the "digital gold" narrative of Bitcoin is more dependent on market sentiment and technical expectations. When Bitcoin hit a new high in 2021, the gold price was in a stage of low. Starting in 2024, the two have risen synchronously due to factors such as central bank gold purchases and the approval of Bitcoin ETFs. It can be seen that their correlation is driven by stage events rather than an inherent logical connection.
Correlation with US Stocks, a Double Helix Structure under Liquidity Suction
In terms of US stocks, Bitcoin is often classified as a "risk asset", and its price trend shows a significant positive correlation with the Nasdaq index dominated by tech stocks. This correlation reached a peak in 2021, with the two synchronously hitting historical highs and then correcting, and rebounding in sync at the end of 2022, showing the consistency of market behavior driven by risk appetite.
The correlation between Bitcoin and the S&P 500 index presents a relatively mild positive correlation, with the correlation coefficient mostly maintained between 0 and 0.5, and Bitcoin's gains significantly higher than the S&P 500, with price synchronization more evident in the high range. This relationship has become particularly pronounced in the late 2024, when the expectation of the Fed's dovish stance has generally boosted risk assets.
During the period when the Fed was signaling rate cuts, this synchronization even exceeded the negative correlation strength between traditional tech stocks and bonds. The correlation strength between the two has exceeded the group effect among traditional tech stocks, implying that cryptocurrencies are being systemically embedded into the valuation system of growth stocks. However, it is worth noting that this positive correlation exhibits significant asymmetry: in the market downturn cycle, the correlation coefficient between Bitcoin and US stocks is not high, revealing its excess risk premium characteristics under high volatility.
This phenomenon can be explained from the perspective of market psychology and liquidity. When global economic expectations are positive, investor risk appetite rises, and funds flow into both US stocks and Bitcoin; when risk aversion sentiment heats up, the two may come under pressure. QUICK FactSet data shows that the total market value of stocks priced in US dollars worldwide increased by $13.6 trillion at the end of 2023, reaching $121.8 trillion, while Bitcoin's gains exceeded 150% over the same period, confirming the common drive of liquidity easing and risk appetite on the two. However, the high valuation of US stocks also implies the risk of correction, and if the stock market corrects, Bitcoin may face synchronized pressure, while gold may benefit from the demand for safe havens.
Reshaping of Financial Attributes
The changes in the correlation between Bitcoin and US stocks, gold reflect the structural transformation of the participants in the crypto market. In the early days, Bitcoin was mainly held by retail investors and the geek community, and its price was independent of the traditional financial system. But after 2020, the involvement of institutional investors has accelerated its financialization, making it more susceptible to contagion from US stock sentiment. The growth of open interest in CME Bitcoin futures has further reinforced this path. In addition, institutional variables such as the SEC's approval of Bitcoin spot ETFs and regulatory policy differences across countries have also had a long-term impact on the asset attributes of Bitcoin.
The high-level volatility of Bitcoin after breaking through the $100,000 historical high is the result of the interaction of multiple market forces. On the one hand, early investors are gradually realizing their profits at high levels, while new capital inflows through channels such as ETFs provide strong support, and the ebb and flow of these buying and selling forces leads to violent price fluctuations within the range.
On the other hand, the current market is still in a period of easing expectation brewing, and large-scale liquidity injection has not yet materialized, with the market mainly driven by the rotation of existing capital between different price levels, and the lack of sustained incremental capital inflows has limited the upward momentum after breaking new highs. At the same time, the more active use of leveraged tools such as futures and perpetual contracts has amplified the price volatility, and frequent forced liquidations have further exacerbated market volatility.
But overall, the reflexivity of technological innovation is also nurturing new possibilities. Bitcoin is currently being incorporated into the asset-liability management framework of sovereign wealth funds, and appropriate allocation of crypto assets can enhance the tail risk defense capability while maintaining a stable Sharpe ratio. This functional evolution suggests that the correlation between crypto assets and traditional assets will present a more complex hierarchical structure, fluctuating as risk assets in periods of macroeconomic stability, and releasing non-linear correlations in times of systemic crisis, ultimately developing an independent asset class positioning.
In the myth of Noah's Ark, the clean animals entered in pairs, while the unclean animals went their separate ways. The dilemma of the correlation between Bitcoin and traditional assets is like the "financial monster" that cannot find a companion in the flood of digital civilization. Perhaps this lack of correlation is its true nature, neither needing to be benchmarked against the millennium-old hard currency, nor to be associated with the tech bubble, but to redefine the value coordinates as a native blockchain asset.
