Data shows the correlation between the Bitcoin price and the stock market is going up, putting the “digital gold” narrative at risk.

As per the latest weekly report from Arcane Research, BTC’s price has increasingly become correlated with the stock market in the last couple of years, undermining the digital gold narrative.

The relevant indicator here is the “360-Day Bitcoin correlation with S&P 500,” which measures how the BTC price changes in response to fluctuations in the S&P 500 price.

When the value of this indicator is around zero, it means there is no particular correlation between the two assets.

While values greater than zero imply that the BTC price has somewhat followed changes in the value of S&P 500 lately.

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On the other hand, values below zero show there is rather a negative correlation between the two commodities, meaning when the price of one goes up, the other falls down.

Now, here is a chart that shows the 360-day Bitcoin correlation with S&P 500 since the year 2014:

As you can see in the above graph, the correlation between Bitcoin and S&P 500 (and hence the stock market) has become quite high in the last couple of years.

Many believe that BTC is a “safe haven” that will protect their portfolios against uncertainty in the wider market and inflation. However, for that to be true, the crypto has to be uncorrelated with the stock market.

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But since the correlation between the two has shot up since the summer of 2020, the coin is not quite the same safe haven it was when its correlation floated around zero between 2014 and 2020.

The report suggests that the reason behind this increase seems to be institutional investors buying into the crypto.

During the COVID-19 crash, BTC’s correlation with the stock market increased a bit, but it was still relatively low. Institutional investors saw this and jumped into the coin, believing it to be a safe haven. It was then that the digital gold narrative took form.

Now, since Bitcoin has become so correlated with the stock market, this narrative may be under risk of breaking down. However, the report notes that another scenario can also happen, and that is a resurgence in the narrative instead as investors look to protect their money against the ever rising inflation.

At the time of writing, Bitcoin’s price floats around $37k, down 4% in the last seven days.

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