Crypto trader Scott Melker says that while stocks and Bitcoin (BTC) have appeared to move in tandem since Black Thursday: "They are not correlated assets".

In a Twitter thread for his 84,000 followers, "The Wolf Of All Streets" outlined his theory about why Bitcoin volition tread its own path during the financial crunch. Melker looked at the cost of BTC since its creation in 2009 and compared information technology to assets in legacy markets similar stocks. According to Melker, the cryptocurrency has only been moderately correlated with traditional markets for a brief flow.

History tells the story

As Melker explained in detail, "You can compare any 2 avails on a calibration of -1 to 1. 1 means correlated."

Information from eToro's just released Q1 2022 report found that BTC and the SPX (Standard and Poor's 500 index) had a correlation of 0.59 in Feb 2022. In one case the pandemic took hold, the cryptocurrency "became significantly more correlated with gold than with the [SPX]," achieving a correlation of 0.72.

What virtually the March 12 downturn?

While the figures may vary, they don't invalidate Melker's argument. BTC bottomed out on Black Thursday in mid-March but the SPX didn't follow until more than a calendar week later. Melker said traders should accept note of the difference betwixt the functioning of cryptocurrencies and traditional markets over this period:

"For that 9 day period, Bitcoin was rise while SPX was falling. Big time. Bitcoin went upward 84% in that time. To believe they are correlated directly would mean that Bitcoin was leading the market place."

Source: Twitter

Why investors should still look to Bitcoin

Given the risks with stocks in what the IMF predicts will be the biggest downturn since the Great Depression, if Bitcoin is non correlated with stocks, then it could testify to be a adept way to diversify an investment portfolio. Bitcoin may not be the safe haven it was touted equally, but it does offer a different risk profile.

"By definition it is uncorrelated [to these markets]," Melker wrote:

"This is the very reason that all investors should agree some Bitcoin — it offers idiosyncratic risk rather than systematic chance like other assets. Fifty-fifty if information technology is a RISKIER asset, having it in a portfolio reduces overall portfolio chance due to this lack of correlation."