“Wall Street is coming to Bitcoin.”
The phrase was used throughout the cryptography circle to induce both hope and fear. Today, it is no longer a future threat or a bullish promise. It’s just reality.
The original premise of Bitcoin (or generally encryption) – censor-resistant, traditional financial institutions and government-free assets) is rapidly fading as Wall Street giants (and powerful politicians) continue to establish a strong swirl in the digital asset space.
In the early days of the digital asset revolution, Bitcoin was praised as uncorrelated and acquiesced anti-establishment. Tradfi asset classes like the S&P 500 will go up and down. Vitcoin didn’t bother me.
What Bitcoin bothered was the flaws in the traditional financial system, and it remains here to this day.
A major example in BTC history is not much talked about anymore, but the 2013 crisis at the Bank of Cyprus.
The crisis, which was caused by over-exposing local real estate companies and over-exposed banks amid the European debt crisis, saw deposits over 100,000 euros receive substantial haircuts.
In fact, 47.5% of the uninsured sediment was seized. Bitcoin’s response was to move up sharply upwards until it exceeded the $1,000 threshold for the first time in its history.
After the long-term bear market surrounding the collapse of Mount Gox, the idea of mass adoption grew, and entry into the Wall Street sector was considered a sign of Bitcoin verification, meaning liquidity, mass adoption and price maturity.
It changed everything.
Prices may have matured, as evidenced by the decline in volatility. But let’s face it. Vitocoins are now merely another macro-driven risk asset.
“Bitcoin, once celebrated with low correlations with mainstream financial assets, is increasingly sensitive to the same variables that drive the stock market over a short time frame,” the NYDIC study states in its report.
In fact, Nydig’s calculations show that the correlation is hovering near the upper limit of the historical range. “The correlation between Bitcoin and US stocks remained up until the end of the quarter, closing at 0.48, a level close to the upper limit of the historic range.”
Bitcoin correlation with S&P 500, gold, USD. (NYDIG study)
Simply put, if you have blood on the street (such as Wall Street), Bitcoin will also bleed. Bitcoin catches a cold when Wall Street sneezes.
Even Bitcoin’s “digital gold” monikers are under pressure.
Nydig points out that the correlation between Bitcoin and physical gold and the US dollar is close to zero. That’s all for the discussion of “hedge” at least for now.
Risk assets
So why shift?
The answer is simple. For Wall Street, Bitcoin is not a digital gold, but another risky asset, synonymous with “safe haven.”
Investors are re-licensing everything from whiplash in central bank policy to geopolitical tensions.
“This sustained correlation strength with US stocks can be largely due to a series of macroeconomic and geopolitical developments, tariff disruptions, and an increase in global conflicts that have had a major impact on remeasuring investors’ sentiment and assets across the market,” Nydig said.
Like it or not, this is here to stay for at least the medium to medium term.
As long as central bank policy, macros, and war-related red headlines hit the tape, Bitcoin could move in parallel with stocks.
“The current correlation regime may persist as long as global risk sentiment, central bank policy and geopolitical flashpoints remain the dominant market narrative,” the Nydig report states.
For Maxis and long-term holders, the original vision remains unchanged. The limited supply of Bitcoin, borderless access, and decentralized nature is not touched. Don’t expect them to affect price action yet.
For now, the market sees Bitcoin as just another stock ticker. Balance your trade strategy accordingly.
