Bitcoin Signalling Major Risk Off Trade?

A look at the relationship of bitcoin (#bitcoin) one of the most risky asset classes with other asset classes over the last year reveals some interesting details. We can say with almost 100% certainty that bitcoin shows a strong positive relationships with most asset classes and the ten year bond yield and a strong negative relationship with copper. This suggests that the recent sell off in bitcoin could be a precursor to a major risk off trade:

Bitcoin Vs Other
Asset Classes
Correlation
Significance
S & P 500
0.860
0.000
Ten Year Bond Yield
0.530
0.000
Euro
0.673
0.000
Gold
0.476
0.000
Copper
-0.879
0.000
Crude Oil
0.800
0.000

A look at the relationship between bitcoin returns and other asset class returns over the last year however paints a different picture. There is a weak inverse relationship between bitcoin returns and the 10 year bond yield changes but the relationship between other asset class returns and bitcoin returns is not statistically significant. This suggests a continued melt down in bitcoin is a precursor to lower bond yields which could occur due to a flight to quality out of risky assets:

Bitcoin
Returns Vs Other Asset Class Returns
Correlation
Significance
S & P 500
0.156
0.273
Ten Year Bond Yield
-0.340
0.015
Euro
0.034
0.813
Gold
0.047
0.743
Copper
-0.160
0.261
Crude
-0.180
0.207

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About rajveeronmarkets

I am an avid market watcher having followed capital markets in the US and India since 1993. My research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and have over 20 years of experience in the above areas covering the US and Indian Markets.
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