Bitcoin Drops in Lockstep With Stocks and Bonds (Not Much of a Hedge)

Bitcoin has correlated strongly with inflation, too, as consumer prices soared 8.3% in the 12 months through April.

Bitcoin advocates have stressed for some time that the world’s biggest digital currency can hedge against inflation and declines by stocks and bonds. But that hasn’t happened this year, as stocks, bonds and bitcoin have dropped in tandem. 

Year to date, the S&P 500 has suffered a 15% drop in total return, the Bloomberg U.S. Aggregate Bond Index posted a negative return of 10%, and bitcoin has plunged 37% to $30,029.

That’s obviously not much of a hedge. The three-month correlation between digital currencies bitcoin and ether and major U.S. stock indices touched a record last week, according to Dow Jones Market Data, as cited by The Wall Street Journal. The correlation reached 0.67 to 0.78, with 1 representing complete positive correlation and 0 representing no correlation.

Bitcoin recently has correlated strongly with inflation, too. Consumer prices soared 8.3% in the 12 months through April. The cryptocurrency slid 28% during that period.

Bitcoin proponents have posited that the currency is a store of value. But bitcoin at this point looks more like a store of speculation.