Is Bitcoin digital gold or just a tech stock in disguise?

When US stocks plummeted by almost 4%, with NVDA down by 7% and Apple down by 4%, Bitcoin dropped by almost 15%. Why did this happen?

Since the middle of February we have seen US markets crash, whether this is a result of geopolitics, recession fears or negative speculation we noticed one interesting thing about its effects on another major market. Cryptocurrency is known to be a highly volatile, speculative and liquid market. Another characteristically volatile, highly liquid market that comes to mind is the tech sector. Characterised by rapid innovation, high growth potential and intense competition. Tech stocks like Nvidia, Tesla and Apple are experiencers of serious price swings as investors react to new product launches, earnings reports and shifts in market trends.

So what is cryptocurrency? Cryptocurrency or simply “crypto” is a digital currency that operates on a decentralised system using blockchain technology. This contrasts with traditional nationally backed and managed currencies by governments and central banks like the AUD$ or USD$. Bitcoin or BTC, is the largest and most widely recognised cryptocurrency, and its performance is often seen as representative of the broader crypto market.



Bitcoin’s price has tracked blue chip tech stocks such as Apple, Amazon and Microsoft all year. Cryptocurrency and stock markets are generally known to be somewhat correlated largely as a result of the cryptocurrency's high volatility. There is an overlap of factors affecting both equity markets and cryptocurrency prices, including macroeconomic trends, interest rates, inflation expectations, and overall investor risk appetite. Not only that but its high volatility can also make it sensitive to reactions in other markets. Traders and investors are increasingly treating cryptocurrency the same way they treat stocks, with Bitcoin behaving similarly to high-growth, high-beta tech stocks rather than a hedge against market instability. As institutional adoption grows, Bitcoin’s correlation with equities, especially tech heavy indices like the NASDAQ-100 continues to strengthen, challenging its narrative as an independent asset class.

Using indexes, S&P 500 as a benchmark for the broader stock market, and the NASDAQ-100 for tech stocks, we can see that Bitcoin’s price closely follows the movement of both indexes. The past month’s sharp downturn in the equity markets has had a noticeable impact on Bitcoin’s price.

Now looking at Nvidia (NVDA), one of the more volatile tech stocks, we see an even stronger correlation with BTC than with the broader S&P 500 or NASDAQ-100. Both NVDA and BTC experienced sharp price swings in response to market wide risk-off attitude.


Takeaways?

Bitcoin is becoming more integrated into traditional finance, making it less of an isolated, alternative asset. Investors must consider Bitcoin’s growing sensitivity to equity market fluctuations, particularly in times of economic uncertainty. Bitcoin might have been once thought of as "digital gold" however in the current landscape Bitcoin acts more like a speculative risk asset rather than a pure inflation hedge. Bitcoin's role may continue to evolve, offering both challenges and opportunities for investors who understand its shifting dynamics.

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Disclaimer: This article does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.

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