Bitcoin just hit a decade-low S&P 500 correlation, but the daily data tells a different story
Investors holding Bitcoin alongside US shares can not inform whether or not their portfolio has turn out to be safer merely from a unfavorable correlation between the property’ worth paths. A historic comparability via September 4 exhibits why: Bitcoin and the S&P 500 can transfer additional aside over a 12 months whereas nonetheless posting losses on lots of the identical buying and selling dates.
Crypto asset supervisor Bitwise’s September 7 Market Compass described its 260-day correlation as the lowest since 2015. Its chart measures the logarithms of worth ranges. In CryptoSlate’s calculation utilizing FRED data, that measure was about −0.62. Correlation between share returns over 260 frequent buying and selling observations was +0.40.
The two figures measure different issues. The first tracks how the two worth paths moved over the interval. The second tracks whether or not their share beneficial properties and losses tended to maneuver collectively. Neither exhibits by itself that Bitcoin will offset losses when shares fall.
The FRED costs are additionally recorded at different instances of day. The comparability makes use of out there daily observations, not simultaneous closing costs, so it can not exactly measure how Bitcoin responds to an equity-market shock.
Two costs can diverge whereas losses overlap
Bitwise explicitly labels its chart as a log-level calculation and credit Bloomberg and Bitwise Europe. The calculation describes medium-term motion in the two worth paths. It shouldn’t be a daily-return statistic, nor ought to or not it’s handled as a mistaken model of 1.
For somebody holding each property, portfolio beneficial properties and losses rely upon returns. A unfavorable relationship between worth ranges doesn’t assure unfavorable covariance between returns. In easier phrases, two property can drift in different instructions over months whereas nonetheless rising or falling collectively on particular person days. Their volatility and portfolio weights additionally decide how a lot that co-movement impacts the portfolio.
The FRED Bitcoin observations and S&P 500 series present the distinction. Using the final 260 frequent worth dates via September 4 produces a log-level correlation of −0.6161. Using 260 share returns, from August 25, 2025, via September 4, 2026, produces +0.3957. Calculating 260 returns requires one further beginning worth.
The unfavorable log-level consequence resembles the pattern in Bitwise’s report, but it’s a proxy slightly than an actual replica of its Bloomberg calculation. FRED’s public S&P historical past covers solely 10 years, so it can not independently set up the full “since 2015” rating. That historic declare stays Bitwise’s.
The consequence additionally modifications with the time interval. In the identical asynchronous data, return correlation was +0.14 over 30 observations, +0.32 over 60, +0.34 over 126 and +0.13 over 500, all ending September 4. Because these home windows overlap, they don’t seem to be impartial proof of a mounted long-term correlation.
A hypothetical portfolio exhibits what these variations can imply for an investor. Replacing 5% of the fairness allocation with Bitcoin elevated measured annualized volatility over the 260-return window, from 12.68% to 13.01%. The largest peak-to-trough decline additionally grew, from 9.10% to 9.98%.
Over 500 returns, the consequence reversed. The identical Bitcoin allocation modestly decreased each measured volatility and most drawdown.
| Common-date return window | Allocation | Annualized volatility | Maximum drawdown |
|---|---|---|---|
| 260 observations | 100% S&P 500 | 12.68% | 9.10% |
| 260 observations | 95% S&P 500 / 5% Bitcoin | 13.01% | 9.98% |
| 500 observations | 100% S&P 500 | 16.11% | 18.90% |
| 500 observations | 95% S&P 500 / 5% Bitcoin | 15.73% | 18.66% |
Both home windows finish September 4, 2026. CryptoSlate calculations used the dated Bitcoin CSV and S&P 500 CSV, with weights reset at each frequent remark. Fees, taxes, and dividends had been excluded. The S&P sequence is a worth index, so these are usually not whole investment-return comparisons. Maximum drawdown is the largest decline from a previous portfolio peak inside the pattern.
The desk makes use of costs recorded at different instances slightly than an executable technique rebalanced at one shared closing time.
The two home windows produced different outcomes. Bitcoin elevated measured volatility and drawdown in the 260-return pattern, then modestly decreased each in the 500-return pattern. A low correlation can diversify one supply of threat with out making a portfolio much less unstable than equities alone.
What occurred when equities fell
But full-period volatility is simply a part of the threat: traders additionally must know what occurred to Bitcoin when equities fell. The S&P 500 fell on 115 frequent dates throughout the 260-return pattern. Bitcoin fell on 76 of them and averaged a 1.03% decline throughout all 115 equity-down observations. Correlation inside that subset was +0.29.
Bitcoin fell much more constantly alongside shares throughout bigger declines. On the 25 observations when the S&P 500 fell greater than 1%, Bitcoin declined on 22 and averaged a 2.59% loss. There had been solely three observations when equities fell greater than 2%. Bitcoin fell on all three, averaging a 4.23% decline.
The outcomes describe what occurred on this pattern, not what induced the strikes. Three declines higher than 2% are additionally far too few to estimate how reliably Bitcoin would behave throughout a stock-market crash. Changing the window, loss threshold, or measurement time can considerably change outcomes from such a small pattern.
What the observations do present is that unfavorable pattern correlation coexisted with repeated losses in each property. Investors can not translate a chart of diverging worth paths immediately into an assumption that one holding will offset the different on a dangerous day.
FRED information its Coinbase Bitcoin remark at 5 p.m. PST. Its S&P 500 remark represents the US market shut, sometimes 4 p.m. ET. The two costs due to this fact share a calendar date but not a timestamp.
The calculations retain dates with legitimate observations for each property, then measure modifications between consecutive frequent dates. Bitcoin strikes throughout intervening weekends or holidays are included in the interval. Stock costs are usually not stuffed ahead to create further buying and selling observations.
The timing distinction can change the consequence considerably. Moving Bitcoin’s observations again one calendar day modifications the 260-return correlation to +0.14; shifting them ahead modifications it to +0.03. Over 30 observations, these shifts produce −0.30 and −0.37, respectively.
Those shifts take a look at attainable lead-and-lag results; they don’t create synchronized costs. The sensitivity additionally means +0.40 shouldn’t be learn as the actual correlation between Bitcoin and equities at the identical second. Measuring that will require costs recorded at matching instances.
Bitwise additionally stops wanting describing the decoupling as a hedge. Its report says a repeat of Bitcoin’s roughly 9,800% rise from mid-2015 to late 2017 is unlikely and warns that decouplings often don’t final.
For traders holding each property, the numbers reply two separate questions. The unfavorable log-level correlation exhibits that Bitcoin and the S&P 500 adopted more and more different worth paths over the interval. Their returns present that the two property nonetheless misplaced cash collectively on lots of the identical days.
Portfolio threat depends upon the second query in addition to allocation dimension, volatility, measurement time, and the interval being studied.
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