What do you think of adding a low% of crypto allocation

[MustacheAndaHalf]

Some of the winds which affect stocks also affect crypto making it appear they are linked in some fashion, but during the last stock crash (2020), crypto surged as an alternative.

During "the last stock crash (2020)", crypto fell alongside the stock market - it did not "surge".  Both hit a local high in mid Feb 2020, and both crashed in mid-March.  March 16 was a local low for both of them, and by the next week both surged off their lows.  They hit a high together, crashed together, and then recovered together.  The 2020 crash was a great example of crypto and the U.S. stock market being linked.

[lifeanon269]

You can view it any way you want, or you can run the numbers. Since about 2019 (when investors started paying attention) or so it's pretty highly correlated.

-Walt

I wouldn't say that it is because that's when investors started paying attention. I would more say that during that time frame from 2020 on, that's when there is a stark increase in money supply and thus just about any scarce asset when priced in USD their valuations went far higher. There is a very strong correlation between M2 money supply and the S&P500 and starting around 2019-2022 there is a notable uptick in the money supply which caused several years of heavy price inflation.

Prior this, bitcoin and the S&P500 had near zero correlation. Since then I still wouldn't consider bitcoin and the S&P500 as having high or strong correlation. They're certainly positively correlated, again, mainly because money printing causes all scarce assets to have higher valuations. But a Pearson correlation coefficient of .75 or higher is generally what is considered as having a strong correlation and bitcoin and the S&P500 when averaged out don't really quite hit that mark which shows that bitcoin still marches to the beat of its own drum at times. Over the last 90 days, bitcoin and the S&P500 have a Pearson coefficient of just 0.13, which is pretty close to having no correlation at all.

https://www.blockchaincenter.net/en/crypto-correlation-tool/?timeframe=90days&asset1=SP500&asset2=BTC

I think money printing greatly skews the pricing of scarce assets. It can mask market valuations and make people think that everything is going up when in reality you're barely beating the consumer price index. So there will always be some bit of correlation with scarce assets priced in USD simply because the value of the US dollar is going down in relation to all scarce assets.

I do think that over time however, bitcoin's correlation with the stock market and thus wider economy will become more and more correlated simply because investor trust in bitcoin will continue to grow and as the asset grows in maturity, the market size disparity between them decrease. This will also help drive bitcoin's volatility lower over time as well.

[Juan Ponce de León]

You can view it any way you want, or you can run the numbers. Since about 2019 (when investors started paying attention) or so it's pretty highly correlated.

-Walt

I wouldn't say that it is because that's when investors started paying attention. I would more say that during that time frame from 2020 on, that's when there is a stark increase in money supply and thus just about any scarce asset when priced in USD their valuations went far higher. There is a very strong correlation between M2 money supply and the S&P500 and starting around 2019-2022 there is a notable uptick in the money supply which caused several years of heavy price inflation.

Prior this, bitcoin and the S&P500 had near zero correlation. Since then I still wouldn't consider bitcoin and the S&P500 as having high or strong correlation. They're certainly positively correlated, again, mainly because money printing causes all scarce assets to have higher valuations. But a Pearson correlation coefficient of .75 or higher is generally what is considered as having a strong correlation and bitcoin and the S&P500 when averaged out don't really quite hit that mark which shows that bitcoin still marches to the beat of its own drum at times. Over the last 90 days, bitcoin and the S&P500 have a Pearson coefficient of just 0.13, which is pretty close to having no correlation at all.

https://www.blockchaincenter.net/en/crypto-correlation-tool/?timeframe=90days&asset1=SP500&asset2=BTC

I think money printing greatly skews the pricing of scarce assets. It can mask market valuations and make people think that everything is going up when in reality you're barely beating the consumer price index. So there will always be some bit of correlation with scarce assets priced in USD simply because the value of the US dollar is going down in relation to all scarce assets.

I do think that over time however, bitcoin's correlation with the stock market and thus wider economy will become more and more correlated simply because investor trust in bitcoin will continue to grow and as the asset grows in maturity, the market size disparity between them decrease. This will also help drive bitcoin's volatility lower over time as well.

But what if the power goes out?  Bet you didn't think of that did ya huh, got ya there.

[waltworks]

Well, regardless of your ideas on *why*, I think we can all agree Bitcoin is not a good hedge against a stock market crash. Or at the very least, there's no evidence it would serve well in such a role.

Whether it's a good hedge against cybercrime or the fall of the investment banks, well, that's way outside my wheelhouse. A really economically damaging event would probably crater the stock market and Bitcoin simultaneously, IMO.

-W

[lifeanon269]

Well, regardless of your ideas on *why*, I think we can all agree Bitcoin is not a good hedge against a stock market crash. Or at the very least, there's no evidence it would serve well in such a role.

Ya, I would agree on that. A stock market crash or correction generally results in much tighter monetary policy and money coming out of risk-on assets that I consider many investors treat bitcoin as currently.

I mostly see bitcoin as a hedge and counter-trade against loose and expansive monetary policy. So anything that restricts monetary policy or a move to economic austerity measures I would expect bitcoin to not perform well in.

[LateStarter]

Hoorah !! Bitcoin smashed another ATH today !!   :-)

BTC-USD is firmly below its Dec2024 ATH, but . . .

In my world, BTC-GBP hit an ATH of about £86,930 today – approx. 2% above its previous Dec2024 ATH.

BTC-EUR, BTC-JPY, BTC-CHF, BTC-INR, BTC-AUD, BTC-NZD, BTC-ZAR. BTC-MXN all hit ATHs today.
BTC-VES hit ATHs yesterday AND today.

Not a very serious post. Just an opportune reminder that Bitcoin means different things and affects people in different ways in different parts of the world.

[Glenstache]

How 'bout those $TRUMP and $MELANIA coins, eh?

[waltworks]

If there's a benefit to humanity in crypto out there in the future, it's probably being undercut by that sort of garbage. Nobody is proposing that $trump will ever be useful for anything, it's just pure speculation (with a dash of insider trading thrown in so the creators can make a profit off the suckers).

The thing that sucks is that this sort of shit is gasoline for the fire of any recession we have. Even if you didn't participate, you can get burned by the absolute junkshow of every idiot who "invested" in a bunch of shitcoins losing their shirt/job/house simultaneously.

-W

[41_swish]

Trump coin is dumping. I don't even know why you would buy that nonsense.

[lifeanon269]

Really good analysis article from Fidelity on Bitcoin's volatility for those interested.

https://www.fidelitydigitalassets.com/research-and-insights/closer-look-bitcoins-volatility

[Scandium]

If there's a benefit to humanity in crypto out there in the future, it's probably being undercut by that sort of garbage. Nobody is proposing that $trump will ever be useful for anything, it's just pure speculation (with a dash of insider trading thrown in so the creators can make a profit off the suckers).

The thing that sucks is that this sort of shit is gasoline for the fire of any recession we have. Even if you didn't participate, you can get burned by the absolute junkshow of every idiot who "invested" in a bunch of shitcoins losing their shirt/job/house simultaneously.

-W

This is a scam I find it hard to get upset about, in fact I think it's pretty great. When Trump et al steal money from the government we all loose. But his shitcoin scam just takes money from his idiot followers, and people who want to bribe him. It's annoying trump is getting richer, but since he'll do that no matter what I prefer when he's fleecing his screeching hog followers rather than public funds! Plus anything that cause more misery for trump fans is a win in a my book. I hope they loose all their money then apply for food stamps and realize trump cut those!

[MustacheAndaHalf]

All of the past 12 months of Bitcoin's performance occurs within one week: the week after the U.S. presidential election.  Strip that week away, and Bitcoin has been pretty much flat.

A lot has changed since Feb 20, and Bitcoin has dropped 14%.  But so has the S&P 500!  In the past, Bitcoin was significantly more volatile than the S&P 500.  I often compared it to 3x QQQ, which has lost over half its value in the same time period.

I wonder if Bitcoin going mainstream, through ETFs, has killed the price volatility.

[41_swish]

If you bought bitcoin or some crypto years ago and it is now a substantial portion of your net worth then it probably worth selling some, but if your DCA is so low on it it's probably okay to ride it out, especially if your other investments are in a good spot.

[lifeanon269]

All of the past 12 months of Bitcoin's performance occurs within one week: the week after the U.S. presidential election.  Strip that week away, and Bitcoin has been pretty much flat.

A lot has changed since Feb 20, and Bitcoin has dropped 14%.  But so has the S&P 500!  In the past, Bitcoin was significantly more volatile than the S&P 500.  I often compared it to 3x QQQ, which has lost over half its value in the same time period.

I wonder if Bitcoin going mainstream, through ETFs, has killed the price volatility.

This has been historically true for almost all of bitcoin's existence. In any given year, if you missed any of the top 10 best performing days for bitcoin, then you missed out on almost all of its gains for that year. That is why with bitcoin, time in the market beats timing the market. Fundstrat has a chart illustrating this somewhere on the internet.

[MustacheAndaHalf]

All of the past 12 months of Bitcoin's performance occurs within one week: the week after the U.S. presidential election.  Strip that week away, and Bitcoin has been pretty much flat.

A lot has changed since Feb 20, and Bitcoin has dropped 14%.  But so has the S&P 500!  In the past, Bitcoin was significantly more volatile than the S&P 500.  I often compared it to 3x QQQ, which has lost over half its value in the same time period.

I wonder if Bitcoin going mainstream, through ETFs, has killed the price volatility.

This has been historically true for almost all of bitcoin's existence. In any given year, if you missed any of the top 10 best performing days for bitcoin, then you missed out on almost all of its gains for that year. That is why with bitcoin, time in the market beats timing the market. Fundstrat has a chart illustrating this somewhere on the internet.

Did those 10 days always occur in a row?  No.  And that is the different with what I'm claiming here: I'm saying Bitcoin's performance came from the week after one event: the U.S. presidential election.

I'm also saying that is a very odd thing to drive all of Bitcoin's performance.  Why hasn't anything else mattered?

[MustacheAndaHalf]

If you bought bitcoin or some crypto years ago and it is now a substantial portion of your net worth then it probably worth selling some, but if your DCA is so low on it it's probably okay to ride it out, especially if your other investments are in a good spot.

Might be useful advice for some reading this thread.

Personally, I currently zero crypto.  I did participate in ETH staking for ETH2, but sold afterwards.

[Juan Ponce de León]

Yes I always come to this thread when I need to learn how to maximise my bitcoin returns LMAO

[41_swish]

It is probably too late in the game to get any crazy crypto returns unless you are pumping and dumping some meme coin. Investing in crypto is akin to investing in small cap growth stocks that are very unprofitable.

[Juan Ponce de León]

It is probably too late in the game to get any crazy crypto returns unless you are pumping and dumping some meme coin. Investing in crypto is akin to investing in small cap growth stocks that are very unprofitable.

You are so right.

[MustacheAndaHalf]

Yes I always come to this thread when I need to learn how to maximise my bitcoin returns LMAO

I come here to see when someone will claim to leave for 1-2 years, and show up within 4 months.  Twice.

Like talking to brick walls so I will check back in another year or two.

[Juan Ponce de León]

Yes I always come to this thread when I need to learn how to maximise my bitcoin returns LMAO

I come here to see when someone will claim to leave for 1-2 years, and show up within 4 months.  Twice.

Like talking to brick walls so I will check back in another year or two.

Thrice now

[41_swish]

I could maybe see adding crypto as a diversification measure, but having 50% of your NetWorth tied up in it is probably too volatile for a FIRE plan.

[GuitarStv]

S&P down 10%.  Bitcoin down 10%.  Gold up 26%.


Doesn't look like 'digital gold' is behaving at all like it's unlinked from the markets.

[lifeanon269]

S&P down 10%.  Bitcoin down 10%.  Gold up 26%.


Doesn't look like 'digital gold' is behaving at all like it's unlinked from the markets.

S&P down 2.2%
Gold up 3.3%
Bitcoin up 11.66%

I too can pick random arbitrary time frames.

[MustacheAndaHalf]

asset	1 week	1 month	YTD	12 months
S&P 500	-2.3%	-8.2%	-9.8%	+4.3%
Bitcoin	+11.0%	+11.2%	+0.3%	+41.1%
Gold	+4.7%	+12.2%	+26.8%%	+44.7%

[41_swish]

You can cherry pick any stat you want. Nothing wrong with that. The majority of people hold bitcoin for nothing more than speculation. Basically, seems like an MLM for crypto bros.

[clarkfan1979]

You can view it any way you want, or you can run the numbers. Since about 2019 (when investors started paying attention) or so it's pretty highly correlated.

-Walt

I wouldn't say that it is because that's when investors started paying attention. I would more say that during that time frame from 2020 on, that's when there is a stark increase in money supply and thus just about any scarce asset when priced in USD their valuations went far higher. There is a very strong correlation between M2 money supply and the S&P500 and starting around 2019-2022 there is a notable uptick in the money supply which caused several years of heavy price inflation.

Prior this, bitcoin and the S&P500 had near zero correlation. Since then I still wouldn't consider bitcoin and the S&P500 as having high or strong correlation. They're certainly positively correlated, again, mainly because money printing causes all scarce assets to have higher valuations. But a Pearson correlation coefficient of .75 or higher is generally what is considered as having a strong correlation and bitcoin and the S&P500 when averaged out don't really quite hit that mark which shows that bitcoin still marches to the beat of its own drum at times. Over the last 90 days, bitcoin and the S&P500 have a Pearson coefficient of just 0.13, which is pretty close to having no correlation at all.

https://www.blockchaincenter.net/en/crypto-correlation-tool/?timeframe=90days&asset1=SP500&asset2=BTC

I think money printing greatly skews the pricing of scarce assets. It can mask market valuations and make people think that everything is going up when in reality you're barely beating the consumer price index. So there will always be some bit of correlation with scarce assets priced in USD simply because the value of the US dollar is going down in relation to all scarce assets.

I do think that over time however, bitcoin's correlation with the stock market and thus wider economy will become more and more correlated simply because investor trust in bitcoin will continue to grow and as the asset grows in maturity, the market size disparity between them decrease. This will also help drive bitcoin's volatility lower over time as well.

In the social sciences the general guideline is that r=.10 is small, r=.30 is medium and r=.50 is large. Pearson created the math on the correlation coefficient while documenting that children height is correlated with parents height at r=.50

[lifeanon269]

In the social sciences the general guideline is that r=.10 is small, r=.30 is medium and r=.50 is large. Pearson created the math on the correlation coefficient while documenting that children height is correlated with parents height at r=.50

I mentioned specifically here a "strong" correlation. Something with a 0.5 Pearson coefficient is certainly positively correlated. But I was specifically talking about something as having a strong correlation.

The strength of correlation related to the Pearson coefficient is often broken down to:

r values	Strength of Correlation
0.00-0.19	Very Weak
0.20-0.39	Weak
0.40-0.59	Moderate
0.60-0.79	Strong
0.80-1.00	Very Strong