• Bitcoin’s (BTC) price rose 23% in March as multiple U.S. banks went bust, bolstering fears of a recession.
• Analysts have attributed the move higher to investors seeking shelter in the cryptocurrency amid bank failures.
• However, bitcoin’s positive correlation with the Nasdaq-S&P 500 ratio suggests the rally was partly driven by improved risk appetite stemming from hopes for an early Federal Reserve pivot in favor of liquidity-boosting rate cuts.

Bitcoin’s Tight Correlation With Nasdaq-SPX Ratio Muddies Safe-Haven Narrative

Bitcoin continues to move in lockstep with the Nasdaq to S&P 500 ratio – a sign that its recent rally may be driven not only by investors looking for a safe haven but also by improved risk appetite stemming from hopes for an early Federal Reserve pivot in favor of liquidity-boosting rate cuts.

What is the NDX/SPX Ratio?

The NDX/SPX ratio measures the relative difference in valuation between technology stocks represented in the Nasdaq 100 and a basket of broader industry stocks from the S&P 500. The ratio rose by 5.65% in March, capping its best monthly performance since February 2009, as banking sector instability saw traders aggressively reinstate bets that the Fed would cut rates later this year.

Positive Correlation With NDX/SPX Ratio

The 90-day correlation coefficient between bitcoin and the NDX/SPX ratio rose from 0.81 to 0.90, signaling the strongest positive relationship between the two assets since June 2022. At press time, this correlation coefficient stood at 089 – indicating that on days when the ratio rises, bitcoin is more likely to do so too and vice versa.

Analysts’ Take

Noelle Acheson commented on this positive correlation saying “BTC is still trading like a risk asset.” This suggests that while investors may be moving towards bitcoin as a safe haven asset, it could also be partly due to improved risk appetite resulting from expectations of rate cuts soon being implemented by central banks around world..

Conclusion

In conclusion, while some analysts attribute Bitcoin’s rise to it being seen as a safe haven asset during times of economic turmoil, there is evidence to suggest that much of its appreciation over recent months has been due to increased investor confidence associated with hopes for proactive central bank policy easing measures ahead