Original article by Tanay Ved and Victor Ramirez, Coin Metrics
Original translation: Luffy, Foresight News
Key Takeaways:
Bitcoin’s correlation with stocks and gold has recently fallen to near zero, suggesting that Bitcoin is in the process of decoupling from traditional assets, a phenomenon that typically occurs during major market catalysts or shocks.
Although Bitcoin has a low correlation with interest rates, shifts in monetary policy will also affect Bitcoins performance. During the monetary tightening cycle from 2022 to 2023, Bitcoin showed a strong negative correlation with interest rate hikes.
Although Bitcoin is known as digital gold, historically it has exhibited a higher beta coefficient and stronger upside sensitivity relative to stocks, especially when the macroeconomic situation is optimistic.
Bitcoins volatility has steadily declined since 2021, and its volatility trend is currently closer to that of popular technology stocks, reflecting that its risk characteristics are maturing.
introduction
Is Bitcoin decoupling from the broader market? Bitcoin’s recent outperformance relative to gold and stocks has reignited the topic. In its 16-year history, Bitcoin has been given many labels, from “digital gold” to “store of value” to “risk-on asset.” But does it really have these characteristics? Is Bitcoin unique as an investment asset, or is it just a leveraged representation of existing risk assets in the market?
In this edition of the Coin Metrics State of the Network Report, we explore Bitcoin’s performance in different market environments, focusing on the catalysts and conditions behind periods of low correlation with traditional assets such as stocks and gold. We also examine how shifts in monetary policy regimes affect Bitcoin’s performance, assess its sensitivity to the broader market, and analyze its volatility characteristics in relation to other major assets.
Bitcoin under different interest rate regimes
The Federal Reserve is one of the most influential forces in the financial markets because it can influence interest rates. Changes in the federal funds rate, whether in a tightening or easing monetary policy, directly affect the money supply, market liquidity, and investors risk appetite. Over the past decade, we have gone from a zero interest rate era, to unprecedented monetary easing during the COVID-19 pandemic, to aggressive rate hikes in 2022 to combat rising inflation.
To understand Bitcoins sensitivity to changes in monetary policy, we divide its history into five key interest rate regimes. These phases consider the direction and level of interest rates, ranging from accommodative (fed funds rate below 2%) to tight (fed funds rate above 2%). Since interest rate changes are not frequent, we compare Bitcoins monthly returns to the monthly changes in the federal funds rate.
Data source: Coin Metrics and Federal Reserve Bank of New York
While Bitcoin’s correlation with interest rate changes is generally low and concentrated around the middle, some clear patterns emerge when policy regimes shift:
Loose Policy + Zero Interest Rate (2010-2015): Bitcoin achieved its highest returns, driven by zero interest rate policy after the financial crisis of 2008. Bitcoin’s correlation with interest rates is roughly neutral, which is consistent with Bitcoin’s early growth stage.
Easing Policy + Rate Hikes (2015-2018): As the Fed began to raise interest rates close to 2%, Bitcoins returns fluctuated. Although the correlation spiked in 2017, it has generally remained low, indicating that Bitcoin is somewhat disconnected from macro policies.
Easing policy + rate cuts (2018-2022): This period began with aggressive rate cuts and fiscal stimulus in response to the COVID-19 pandemic, followed by two years of near-zero interest rates. Bitcoin returns have varied widely, but tend to be positive. The correlation has fluctuated wildly during this period, rising from below -0.3 in 2019 to +0.59 in 2021 before returning to near-neutral levels.
Tightening + Rate Hikes (2022-2023): In response to surging inflation, the Fed has implemented one of its fastest rate hike cycles, pushing the federal funds rate above 5%. Under this regime, Bitcoin has shown a strong negative correlation with interest rate changes. Bitcoin has performed poorly amid risk aversion, especially with cryptocurrency-specific shocks such as the collapse of FTX in November 2022.
Tightening + Rate Cuts (2023-Present): With three high rate cuts completed, we have seen Bitcoin performance shift from neutral to moderately positive. This period has also seen catalysts such as the U.S. presidential election, as well as shock events such as the trade war, which continue to impact Bitcoins performance. The correlation remains negative but appears to be gradually approaching 0, suggesting that Bitcoin is in a transition phase as macroeconomic conditions begin to ease.
While interest rates set the market backdrop, comparing Bitcoin to stocks and gold sheds more light on its performance relative to major asset classes.
Bitcoin returns relative to gold and stocks
Relevance
The most straightforward way to tell if one asset is decoupling from another is to look at the correlation between returns. Below is a chart of the 90-day return correlation between Bitcoin and the SP 500 and Gold.
Data source: Coin Metrics
Indeed, we see that Bitcoins correlations with both gold and stocks are historically low. Typically, Bitcoins returns fluctuate between correlations with gold or stocks, with a generally higher correlation with gold. Notably, Bitcoins correlation with the SP 500 rose in 2025 as market sentiment heated up. But starting around February 2025, Bitcoins correlations with both gold and stocks have trended towards zero, indicating that Bitcoin is in a unique phase of decoupling from gold and stocks. This situation has not been seen since the peak of the previous cycle in late 2021.
What usually happens when correlations are so low? We collated the periods when Bitcoin’s rolling 90-day correlation with the SP 500 and gold was below the significance threshold (around 0.15) and annotated the most noteworthy events at that time.
Bitcoin’s low correlation with the SP 500
Bitcoin and Gold’s Low Correlation Period
Unsurprisingly, past decoupling of Bitcoin from other assets has occurred during periods of significant shocks to the cryptocurrency market, such as China’s ban on Bitcoin and the approval of a Bitcoin spot ETF. Historically, periods of low correlation have typically lasted around 2-3 months, though this depends on the correlation threshold you set.
These periods were indeed accompanied by modest positive returns, but given that each period was unique in its own way, it is important to carefully consider the unique characteristics of these periods before drawing any conclusions about Bitcoins recent performance. That being said, Bitcoins recent low correlation with other assets is a desirable characteristic for those looking to allocate a large amount of Bitcoin in a risk-diversified portfolio.
Market beta coefficient
In addition to correlation, market beta is another useful measure of the relationship between an assets return and the markets return. Market beta quantifies the extent to which an assets return is expected to move with the markets return and is calculated by subtracting the assets return minus the risk-free rates sensitivity to a benchmark. While correlation measures the direction and strength of the linear relationship between an asset and a benchmarks return, market beta measures the direction and magnitude of an assets sensitivity to market fluctuations.
For example, Bitcoin is often said to have a high beta relative to stock market trading. Specifically, if an asset (such as Bitcoin) has a market beta of 1.5, then when the market benchmark asset (SP 500) changes by 1%, the return of the asset is expected to change by 1.5%. A negative beta coefficient means that when the benchmark assets return is positive, the return of the asset is negative.
For most of 2024, Bitcoins beta relative to the SP 500 was well above 1, meaning it was highly sensitive to stock market fluctuations. In optimistic, risk-on market environments, investors who held a certain portion of Bitcoin experienced higher returns than those who held only the SP 500. Although Bitcoin is often labeled as digital gold, its low beta relative to physical gold suggests that holding both assets can hedge the downside risk of each asset.
As we move into 2025, Bitcoins beta relative to the SP 500 and gold begins to decline. While Bitcoins reliance on these assets is decreasing, Bitcoin remains sensitive to market risk and its returns remain correlated to market returns. Bitcoin may be becoming a distinct asset class, but it still trades largely like risk-on assets, and there is no strong evidence that it has become a safe haven asset.
Bitcoin performance during periods of high volatility
Realized volatility provides another dimension to understanding Bitcoins risk characteristics, measuring how much the price of Bitcoin fluctuates over a period of time. Volatility is often considered one of Bitcoins core characteristics, both a driver of risk and a source of return. The chart below compares Bitcoins 180-day rolling realized volatility with the volatility of major indices such as the Nasdaq, SP 500, and some technology stocks.
Data source: Coin Metrics and Google Finance
Bitcoin volatility has trended downward over time. In Bitcoins early days, realized volatility often exceeded 80%-100%, driven by cycles of sharp price increases and corrections. Bitcoin volatility rose along with equity volatility during the COVID-19 pandemic, and in some periods in 2021 and 2022, its volatility also rose independently due to cryptocurrency-specific shocks such as the collapse of Luna and FTX.
However, Bitcoins 180-day realized volatility has gradually declined since 2021, and has recently stabilized around 50%-60% even during periods of high market volatility. This puts its volatility on par with many popular tech stocks, lower than MicroStrategy (MSTR) and Tesla (TSLA), and very close to NVIDIAs volatility. While Bitcoin remains susceptible to short-term market fluctuations, its relative stability compared to past cycles may reflect its maturity as an asset.
in conclusion
Has Bitcoin decoupled from the rest of the market? That depends on how you measure it. Bitcoin is not completely immune to the real world. It is still subject to the market forces that affect all assets: interest rates, specific market events, and the returns of other financial assets. Recently, we have seen Bitcoins returns lose correlation with the rest of the market, but whether this is a temporary trend or part of a longer-term market shift remains to be seen.
Whether Bitcoin has decoupled raises a larger question: What role does Bitcoin play in a portfolio that attempts to diversify risk? Bitcoin’s risk and return characteristics can confuse investors, as it can resemble a highly leveraged Nasdaq one week, digital gold another, and a hedge against the debasement of fiat currencies another. But perhaps this volatility is a feature, not a bug. Rather than drawing imperfect analogies to other assets, it is more constructive to understand why Bitcoin is coming into its own as it evolves into a unique asset class.
