Crypto prices have mostly risen in 2021—despite a bout of volatility in recent weeks. And that price run-up has stoked intense interest among investors eager to gain some exposure to cryptographic assets like bitcoin
Absent an exchange-traded fund that allows for direct exposure to bitcoin and crypto—one doesn’t currently exist in the U.S.—there are a number of assets that offer high correlations with the world’s No. 1 virtual currency.
In simple terms, correlation refers to the extent to which assets perform in relation to one another.
Based on commonly used statistical measures, a correlation of 0 means the performance of one asset is uncorrelated to the other, while a correlation of 1 indicates that the asset moves in lockstep—in the same direction, and by the same degree. A negative correlation means that assets tend to move in the opposite direction.
For its part, bitcoin has been viewed as an asset that isn’t correlated with many others. The crypto asset certainly has a low correlation with stocks, as represented by the S&P 500 index
and a pretty low correlation with technology stocks, as represented by the large-capitalization oriented Nasdaq-100 index
Bitcoins correlation with the Nasdaq-100, as measured in late May, was around 0.20 on a rolling 20-day average, and its correlation with the S&P 500 is 0.29, as of June 2, according to Dow Jones MarketWatch data.
The asset with the highest correlation to bitcoin, presently, is the Grayscale Bitcoin Trust
at 0.81, meaning that the trust moves nearly in lockstep with the crypto.
That is even as competition and expected bitcoin-pegged ETFs have sapped GBTC of a premium that it used to enjoy relative to its net asset value.
CoinDesk reports that the GBTC premium was around 30% at the beginning of 2021, but is now trading at discount at around -11.40% to NAV, as of the middle of the week.
GBTC has been closed to new investors and is also hoping to convert its trust into a bitcoin ETF, if it can secure regulatory approval—a challenge as no crypto-pegged fund has been greenlighted in the U.S.—yet.
Crypto platform Coinbase Global’s
correlation to bitcoin, meanwhile, is comparatively low at 0.32. lower than Tesla Inc.
at 0.55, as well as bitcoin mining companies Riot Blockchain
at 0.60 and Marathon Digital Holdings
Coinbase, the U.S.’s largest crypto platform, went public in mid April and is down nearly 30% since then. Bitcoin is down 42% over the same period.
As the chart illustrates the U.S. dollar
has a negative correlation with bitcoin, at -0.37.
—Ken Jimenez contributed to this article