Coin Metrics: Is Bitcoin depegged from the market?

Author: Tanay Ved, Victor Ramirez Source: Coin Metrics Translation: Shan Ouba, Jinse Finance

Main Points:

• Correlation of Bitcoin with Stocks and Gold has recently dropped to nearly zero, indicating the emergence of a typical "decoupling" phase, a phenomenon that often occurs during significant market events or shocks.
• The correlation between Bitcoin and interest rates is usually low, but changes in monetary policy have a certain impact on its performance, especially during the interest rate hike cycle of 2022–2023, where Bitcoin showed the strongest negative correlation with interest rates.
• Although referred to as "digital gold", Bitcoin has historically exhibited a higher "Beta value," meaning it is more sensitive to stock market upswings, especially during phases of macroeconomic bullishness.
• Since 2021, the realized volatility of Bitcoin has been continuously decreasing, and is now approaching the volatility of some mainstream tech stocks, indicating that its risk characteristics are maturing.

Introduction

Is Bitcoin decoupling from traditional markets? Its strong performance relative to gold and stocks recently has reignited this discussion. Over the past 16 years, Bitcoin has been labeled in various ways, from "digital gold" to "store of value" to "risk asset."

But does Bitcoin really meet these definitions? Is it a unique investment asset, or is it just a leveraged expression of existing high-risk assets?

This article will delve into the behavior of Bitcoin in different market environments, focusing on periods when its correlation with traditional assets like stocks and gold has decreased, as well as the driving factors behind this. We will also explore the impact of changes in monetary policy on Bitcoin's performance, Bitcoin's sensitivity to macro markets, and its volatility comparison with other major assets.

Performance of Bitcoin in Different Interest Rate Environments

The Federal Reserve is one of the most influential forces in the global financial markets due to its ability to directly impact interest rates. Changes in the federal funds rate directly affect the money supply, market liquidity, and investors' risk appetite, whether in tightening or loosening phases.

Over the past decade, we have experienced a shift from a zero interest rate era, through unprecedented easing policies during COVID, to a radical rate hike cycle in 2022 in response to inflation.

To understand Bitcoin's sensitivity to changes in monetary policy, we divide its history into five key interest rate cycles. These cycles are classified based on the direction and level of interest rates, ranging from easing phase (federal funds rate < 2%) to tightening phase (federal funds rate > 2%).

Given that the frequency of interest rate changes is not high, we will compare and analyze Bitcoin's monthly returns with the monthly changes in the federal funds rate.

Source: Coin Metrics Reference Rate and New York Federal Reserve Bank

Although the correlation between Bitcoin and interest rate changes is generally low and concentrated around the center, different patterns especially emerge during periods of policy regime shifts:

• Loose Monetary Policy + Zero Interest Rate Policy (2010-2015): Driven by zero interest rates after the 2008 financial crisis, the return on Bitcoin during this period reached historical highs. The correlation with interest rates was roughly neutral, aligning with Bitcoin's early growth phase.
• Loose+Interest Rate Hike (2015-2018): As the Federal Reserve began to raise interest rates to 2%, Bitcoin's return fluctuated wildly. Although the correlation increased in 2017, it remained generally low, indicating a disconnection from macro policies.
• Loose Monetary Policy + Interest Rate Cuts (2018-2022): In response to the COVID-19 pandemic, the Federal Reserve began significantly cutting interest rates and implementing fiscal stimulus, resulting in interest rates approaching zero over the next two years. The return rate of Bitcoin fluctuated greatly but leaned towards positive values. During this period, the correlation fluctuated significantly, rising from below -0.3 in 2019 to +0.59 in 2021, and then falling back to near neutral.
• Restrictive Interest Rate Hikes (2022-2023): In response to soaring inflation, the Federal Reserve initiated one of the fastest interest rate hike cycles in history, pushing the federal funds rate above 5%. This cycle has demonstrated the strongest negative correlation between BTC and interest rate changes. Against the backdrop of tightening financial conditions and heightened risk aversion, Bitcoin's performance has weakened, compounded by shocks specific to the cryptocurrency sector, such as the FTX collapse in November 2022.
• Restrictive + Rate Cuts (2023 to Present): With the completion of three high-level rate cuts, we see Bitcoin (BTC) performing neutrally to slightly positively. During this period, catalysts such as the U.S. presidential election and shocks from trade wars continue to influence its trend. The correlation remains negative, but it seems to be gradually approaching zero, indicating that as the macro environment begins to ease, Bitcoin is in a transitional phase.

Although interest rates set the backdrop, comparing Bitcoin with stocks and gold helps reveal its relative behavior with major asset classes.

How Bitcoin's Returns Follow the Trends of Gold and Stocks

correlation

To determine whether an asset is decoupled from another asset, the most direct method is to observe the correlation of returns. The chart below shows the 90-day correlation between Bitcoin, the S&P 500 index, and gold.

Indeed, we do see Bitcoin's correlation with gold and equities at an all-time low. Typically, Bitcoin's rate of return fluctuates between correlation with gold or stocks, with a higher correlation with gold. Notably, Bitcoin's correlation with the S&P 500 has risen in 2025 as market sentiment has picked up across the board. But starting around February 2025, Bitcoin's correlation with both gold and stocks tends to zero, suggesting that Bitcoin is in a unique phase of "decoupling" from gold and stocks. This has not happened since the peak of the previous cycle at the end of 2021.

What usually happens when the correlation is so low? We have compiled periods when the 90-day rolling correlation between Bitcoin and the S&P 500 index and gold fell below a significant threshold (around 0.15), and annotated the most noteworthy events at that time.

Low Correlation Period Between Bitcoin and the S&P 500 Index

Low correlation period between Bitcoin and Gold

As expected, past decouplings have occurred during periods of significant special shocks in the cryptocurrency market, such as China's ban on Bitcoin and the approval of spot Bitcoin ETFs. Historically, periods of low correlation typically last around 2-3 months, but this depends on the threshold of correlation.

These periods have indeed been accompanied by moderate positive returns, but given that each period has its own uniqueness, it is wise to reflect on these unique aspects before drawing any conclusions about Bitcoin's recent performance. That said, for assets looking to allocate a significant amount of Bitcoin in a risk-diversified portfolio, Bitcoin's recent low correlation with other assets is an ideal characteristic.

Market Beta Coefficient

In addition to correlation, the market Beta coefficient is another useful indicator for measuring the relationship between the asset and market returns. The market Beta quantifies the degree to which the expected asset returns change with fluctuations in the market assets, calculated by subtracting the risk-free rate relative to a benchmark from the sensitivity of asset returns. Correlation measures the direction and strength of the linear relationship between the asset and benchmark returns, while the market Beta coefficient measures the direction and magnitude of the asset's sensitivity to market volatility, adjusted for market volatility.

For example, it is often said that Bitcoin has a "high beta coefficient" compared to the stock market. Specifically, if an asset (such as Bitcoin) has a market beta coefficient of 1.5, then when the market benchmark asset (the S&P 500 index) experiences a 1% change, its returns are expected to increase by 1.5%. A negative beta coefficient means that the asset's returns are negative relative to the positive changes of the benchmark asset.

For most of 2024, the Beta coefficient of Bitcoin relative to the S&P 500 index was far greater than 1, which means it is highly sensitive to stock market fluctuations. In a bullish market environment with high risk appetite, investors holding a significant amount of Bitcoin earned returns far exceeding those of investors only holding the S&P 500 index. Although Bitcoin is often referred to as "digital gold," its Beta coefficient relative to physical gold is lower, meaning that holding both assets can hedge against the downside risk of each.

As we move further into 2025, the trading beta of Bitcoin has begun to fall below that of the S&P 500 index and gold. Bitcoin remains sensitive to market risks, and its returns are still linked to market returns, although the degree of dependence on market returns has decreased. Bitcoin may be becoming a unique asset class, but its trading behavior still resembles that of risk assets, and there is currently no strong evidence to suggest that it has become a "safe-haven" asset.

Performance of Bitcoin During High Volatility Periods

Realized volatility is another dimension for understanding the risk profile of Bitcoin, measuring the extent of price fluctuations over a period of time. Volatility is often regarded as one of the core characteristics of Bitcoin, serving both as a driver of risk and a source of returns. The chart below compares the 180-day rolling realized volatility of Bitcoin with major indices such as the Nasdaq, S&P 500, and some tech stocks.

Source: Coin Metrics reference rates and Google Finance, based on Coin Metrics' actual volatility method.

The volatility of Bitcoin has shown a downward trend over time. In the early stages, driven by explosive rises and correction cycles, its actual volatility often exceeded 80% to 100%. During the COVID-19 pandemic, volatility rose in sync with the stock market; in 2021 and 2022, it also increased individually due to cryptocurrency-specific shocks such as the collapse of Terra Luna and FTX.

However, since 2021, its 180-day actual volatility has gradually decreased, recently stabilizing at around 50-60% even amid increased market fluctuations. This puts it on par with many popular tech stocks, below MSTR and TSLA, while its position size is close to NVIDIA (. Although it remains susceptible to short-term market fluctuations, its relative stability compared to past cycles may reflect its maturity as an asset and the ongoing evolution of its ownership base.

Conclusion

Has Bitcoin decoupled from the rest of the market? It depends on how you measure it. Bitcoin is not completely isolated from the real world. It is still subject to the market forces that affect all assets: interest rates, special market events, and of course, the returns of other financial assets. Recently, we have seen Bitcoin's returns become less correlated with the rest of the market, but whether this is a temporary trend or part of a long-term market mechanism remains to be seen. Like all trends: it exists until it no longer does.

Has Bitcoin decoupled? This raises a larger question: what role does it play in a portfolio that seeks to diversify risk and combat other market risks? The risk and return profile of Bitcoin may leave investors in a narrative-induced daze: one week it is the highly leveraged Nasdaq, the next week it is digital gold, and the week after that it becomes a hedge against fiat currency devaluation. However, this volatility may be a feature rather than a bug. Instead of making imperfect analogies with other assets, it is more constructive to understand why Bitcoin is evolving in its own direction as it matures into a unique asset class.