Does crypto move with stocks? Bitcoin and equity correlation explained

Sometimes, but not consistently. Bitcoin and other cryptocurrencies moved largely independently of stock markets before 2020, then became noticeably more correlated with equities, especially technology stocks, during 2020–22, when both reacted to the same shifts in interest rates and risk appetite. The relationship has since strengthened and weakened in different periods, and crypto-specific events can break it entirely.

For a trader, the practical question is not "is crypto correlated with stocks?" but "if my stock positions fall, how likely is it that my crypto positions fall too, and by how much?" This guide explains how correlation is measured, what the evidence shows, why it changes, and how to account for it when sizing positions.

What correlation measures

The correlation coefficient measures how consistently two series of returns move together, on a scale from −1 to +1.

• +1: perfectly in step. When one rises, the other rises, in proportion.
• 0: no consistent linear relationship.
• −1: perfectly opposite.

Most real-world pairs sit somewhere in between, and anything above about 0.5 is usually described as a fairly strong positive relationship. The glossary entry on correlation and the currency correlation guide cover the basics in a forex setting; the same maths applies here.

Three limitations matter more than the number itself:

1. It measures direction, not size. Two assets can be highly correlated while one moves three times as much as the other.
2. It depends on the window. Daily returns over 30 days, weekly returns over a year and monthly returns over five years can give very different results for the same pair.
3. It is backward-looking. It describes how two assets behaved in a past period, under the conditions of that period.

Worked example: high correlation, very different moves

The numbers are illustrative.

Here are six weeks of returns for a stock index and for bitcoin:

• Week 1: index +2%, bitcoin +5%
• Week 2: index −3%, bitcoin −8%
• Week 3: index +1%, bitcoin +1%
• Week 4: index +4%, bitcoin +6%
• Week 5: index −2%, bitcoin −7%
• Week 6: index −1%, bitcoin +2%

The correlation coefficient for these six weeks works out at about 0.90, a strong positive relationship: in five of the six weeks, they moved in the same direction. But bitcoin's moves were roughly twice as large. A measure called beta captures this: here, bitcoin moved about 2 units for each 1 unit of index movement. Correlation tells you whether they tend to move together; beta, or simply comparing volatility, tells you how much damage the move does.

With only six data points, a single unusual week (like week 6) changes the result substantially. Real analysis uses far more data, and still produces numbers that drift.

What the evidence shows

Before 2020: largely independent

In bitcoin's early years, its price was driven mainly by crypto-specific factors: adoption, exchange hacks, regulatory news and its own speculative cycles. Few large institutions held it, and it rarely reacted to the same news as the stock market. In a blog post published in January 2022, IMF economists reported that the correlation between bitcoin and S&P 500 returns was 0.01 over 2017–19, effectively none.

2020–21: moving together

The same IMF analysis found that the correlation jumped to 0.36 over 2020–21, meaning the two increasingly moved together. The authors also estimated that bitcoin volatility explained about one-sixth of S&P 500 volatility during the pandemic period, and argued that the closer link created a risk of spillovers between crypto and traditional markets.

Several explanations are commonly offered:

• The same buyers. Hedge funds, trading firms and, later, listed companies began to hold crypto alongside equities. When they cut risk, they could sell both.
• The same driver. Very low interest rates and large central-bank asset purchases in 2020–21 supported prices of long-duration and speculative assets in general. When that changed, both were exposed.
• Retail flows. Many retail traders trade both crypto and growth stocks, often on the same apps, and their appetite for risk tends to rise and fall across both.

2022: falling together, by different amounts

2022 is the clearest example of the relationship in action. As inflation surged, the US Federal Reserve began raising interest rates in March and continued throughout the year, and other central banks followed. Over the calendar year:

• The S&P 500 fell about 19%, its largest annual fall since 2008.
• The Nasdaq Composite, heavy in technology stocks, fell about a third.
• Bitcoin fell about 65%.

The direction was shared; the magnitude was not. And crypto had its own disasters layered on top: the collapse of the TerraUSD stablecoin in May, the failure of crypto lender Celsius in the summer and the collapse of FTX in November. Those were not stock-market events, yet they hit crypto hard. The planned guides to stablecoin depegs and crypto exchange collapses cover what happened.

After 2022: an unstable link

Since 2022, rolling correlations between bitcoin and equity indices have risen and fallen repeatedly. There have been periods when bitcoin tracked technology stocks closely, periods when it moved on its own news (such as the US approval of spot bitcoin ETFs in January 2024, covered in the planned guide to bitcoin ETFs), and periods when the two moved in opposite directions. Anyone quoting a single "bitcoin–stocks correlation" figure should tell you the window and the period, because the number depends on both.

Why the correlation changes

Correlation between any two assets is a summary of what has been driving them. When the same driver dominates both, they move together. When each has its own dominant driver, they separate.

Shared drivers

• Interest rate expectations. Higher expected rates reduce the appeal of assets with no income and long-dated payoffs. Both crypto and high-growth stocks are sensitive to this. The central banks and interest rates guide explains how expectations move.
• The US dollar and global liquidity. A strong dollar and tightening financial conditions have often coincided with weakness in speculative assets.
• Risk appetite. In a broad sell-off, investors reduce exposure to anything that has been volatile. Measures such as the VIX often rise at the same time.
• Leverage. When leveraged traders face margin calls in one market, they may sell positions in another to raise cash.

Crypto-only drivers

• Exchange or lender failures, hacks and stablecoin depegs.
• Regulatory decisions specific to crypto, such as ETF approvals or enforcement actions.
• Supply events such as halvings, and large token unlocks for smaller coins.
• Liquidation cascades on crypto derivatives exchanges, which can move prices sharply on a quiet day for stocks. The crypto leverage and liquidation guide explains how those cascades start.

The crisis effect

In acute stress, correlations between risky assets tend to rise towards 1 as everything is sold for cash. In March 2020, bitcoin lost roughly half its value over two days, 12 and 13 March, while stock markets had some of their worst days in decades. That is exactly the moment when diversification is needed most, and it is when it tends to disappear.

Correlation inside crypto is usually higher

The relationship between crypto and stocks gets most of the attention, but the correlation between different cryptocurrencies is usually much stronger and more stable. Ether, Solana, XRP and most other large coins have tended to move in the same direction as bitcoin on most days, often with larger swings. Smaller coins can be even more sensitive to bitcoin's moves, and their liquidity disappears faster in a sell-off.

That matters for anyone who thinks a basket of five different coins is diversified. In a broad crypto sell-off, it often behaves like one large bitcoin position with extra volatility. If you hold long positions in several coins, treat them as a single group for risk purposes, and remember that the group as a whole may also be correlated with technology stocks at the time.

There are exceptions. A coin can move on its own news, such as a network outage, a token unlock or a legal ruling, and stablecoins are designed not to move at all. But the default assumption, especially on bad days, should be that coins fall together.

Reading a correlation figure you find online

Correlation figures for bitcoin and stocks appear regularly in market commentary and on data sites. Before relying on one, check:

• Which assets. Bitcoin against the S&P 500 is different from bitcoin against the Nasdaq 100, and both differ from the crypto market as a whole against global equities.
• Which returns. Daily, weekly or monthly returns give different answers. Daily figures are noisier; monthly figures need years of data.
• Which window. A 30-day rolling correlation can swing from strongly positive to negative within a few months. A five-year figure smooths that out but hides the swings that matter to a short-term trader.
• How weekends were handled. Including crypto's weekend returns against stock data that has none can distort the result.

A figure that comes without these details is a talking point rather than evidence.

Weekends and the timing problem

Crypto trades every day; stock markets do not. That causes two practical effects.

First, crypto often moves at weekends on news that stock markets will only react to on Monday, so some of the correlation shows up with a delay. Measuring correlation on daily data that includes weekends can understate how closely the two respond to the same news.

Second, bitcoin's weekend moves are sometimes read as an early indication of how stocks might open, but this relationship is loose and often fails. Weekend crypto liquidity is also thinner, which the planned guides to crypto order books and liquidity and bitcoin trading hours and weekends explain.

What this means for position sizing

The practical risk is hidden concentration. Two positions that look separate can behave like one large position on a bad day.

Worked example: overlapping exposure

The numbers are illustrative.

Your account holds €10,000. You open:

• A long Nasdaq 100 CFD worth €10,000, using €500 of margin at 20:1.
• A long bitcoin CFD worth €5,000, using €2,500 of margin at 2:1.

You think of these as two separate trades. The index stop is 4% below entry, risking €400; the bitcoin stop is 10% below entry, risking €500. Each feels acceptable on its own because you assume only one is likely to be hit at a time. But suppose a sharp rise in interest rate expectations hits both on the same day. The index falls 4% and bitcoin falls 10%. Both stops are hit, perhaps with slippage. Your loss is about €400 on the index and €500 on bitcoin, €900 in total, around 9% of the account in a single session. Had you treated them as one correlated position with a combined limit of, say, €450, you would have roughly halved each position before opening it.

Practical steps

• Count correlated exposure together. Decide a maximum risk for a group of related positions (crypto plus growth stocks, for example), not just per trade. The position sizing guide covers per-trade risk; apply the same cap to the group.
• Check recent behaviour, not a headline figure. Look at how your two instruments moved over the last few weeks and in the last sell-off.
• Allow for different magnitudes. If bitcoin tends to move two or three times as much as an index, a position of equal notional value carries two or three times the risk.
• Plan for correlations rising in a crisis. Assume the positions could fall together in a bad week, even if they have been unrelated recently.

If you trade index CFDs alongside crypto, the planned guides to the Nasdaq 100 and the S&P 500 cover contract sizes and hours, and the existing trading index CFDs guide explains the mechanics.

Common mistakes

• Treating crypto as a diversifier by default. It has sometimes been uncorrelated with stocks and sometimes closely linked, especially in sell-offs.
• Quoting one correlation number as fixed. It depends on the window and the period.
• Confusing correlation with magnitude. A correlation of 0.5 with an asset that moves three times as much can still dominate your risk.
• Using correlation to predict direction. "Stocks are rising, so bitcoin should catch up" is a guess, not an analysis. Correlation describes the past relationship, not what either will do next.
• Ignoring crypto-specific risk. Exchange failures and stablecoin collapses can hit crypto when stocks are calm.

Leveraged trading of either asset class carries a high risk of loss. CFD providers' disclosures typically show between about 61% and 89% of retail accounts losing money, and ESMA's 2018 analysis found 74% to 89%. Crypto exposure can lose you all of the money you put in. The crypto volatility and risk guide goes further into why crypto moves are so large.

Frequently asked questions

Is bitcoin correlated with the stock market?

At times. IMF economists found the correlation between bitcoin and S&P 500 returns rose from 0.01 in 2017–19 to 0.36 in 2020–21, and the two fell together in 2022. In other periods the relationship has been weak or even negative. It varies with the time window and with what is driving markets.

Why does crypto move with tech stocks?

Both are sensitive to interest rate expectations and risk appetite, and many of the same investors and traders hold both. When rates rise or investors cut risk, both can be sold. Crypto also has its own drivers, so the link breaks when crypto-specific news dominates.

Did bitcoin fall more than stocks in 2022?

Yes. Over calendar 2022, bitcoin fell about 65%, while the S&P 500 fell about 19% and the Nasdaq Composite about a third. Crypto-specific failures such as TerraUSD and FTX added to the losses that rising interest rates caused across risky assets.

Is crypto a hedge against a stock market crash?

The record does not support relying on it. In March 2020 and through 2022, bitcoin fell sharply alongside stocks. Some investors argue it could behave differently in other kinds of crisis, but that is an argument rather than a demonstrated pattern.

How do I measure the correlation between bitcoin and an index?

Collect returns (not prices) for both over the same dates, ideally aligning crypto to stock-market trading days, and calculate the correlation coefficient, which most spreadsheets and charting platforms can do. Compare several windows, such as 30, 90 and 365 days, to see how stable the relationship is.

Does high correlation mean I should avoid holding both?

Not necessarily, but it means you should size them as if they might fall together. Set a combined risk limit for correlated positions and allow for the fact that crypto typically moves further than an index.