Bitcoin and tech stocks: exploring their correlation patterns
Experienced crypto traders will be familiar with the concept of correlation — the relationship between cryptocurrencies and other assets.
There's the commonly referenced BTC/ETH correlation, which can provide traders with a powerful tool for hedging, diversification, and potentially rewarding trading opportunities. Meanwhile, many traders consider the relationship between bitcoin and the S&P 500 when building out a diversified trading strategy.
Understanding correlation and what influences it can provide powerful insight as you build out a well informed trading strategy. In this article, we'll explore some of the circumstances where a correlation between prices of bitcoin and tech stocks are and aren't found, shedding light on a potential market force traders would be wise to keep in mind.
Why is correlation influential?
It's worthwhile to first understand why traders pay attention to correlation. Many analyze correlation as part of their due diligence because the outcomes can be used to diversify a portfolio and manage risk effectively. For example, where two assets aren't correlated, traders could consider adding both to their portfolios to help manage risk in each market. Conversely, if two assets are found to be correlated, holding them both may not provide diversification, increasing risk.
BTC and tech stocks: when is correlation found?
Let's explore circumstances where bitcoin correlates with tech stocks and how this may impact a trader's decisions.
Interest rate changes
Both BTC and tech stocks are considered risk-on assets, causing their respective prices to react in a similar way during changes in interest rates.
When interest rates fall, the cost of borrowing becomes cheaper. Many traders consider this a good time to allocate funds to risk-on assets, because capital is more readily available. The opposite is also generally true. Rising interest rates can cause a flight to safer haven assets such as bonds and gold. As such, many consider this relationship to be inversely related as a fall in interest rates could cause a simultaneous rise in crypto and tech stock prices.
Sell-offs
The correlation between BTC and tech stocks is also evident during sell-off periods, where bearish traders liquidate their positions in large volumes across a short time period. This was seen during January 2025 when Nvidia's stock plunged 17% in one day, accompanied by BTC with a 7% correction on the same day amid a wider sell-off. Like the reaction brought by an interest rate rise, the risk-on sentiment brought by a sell-off for tech stocks may coincide with movements in BTC and other speculative assets. Both institutional and retail investors may adjust their portfolios in response to evolving market conditions.
Tariffs and trade wars
Another notable cause of correlation are tariffs placed by governments on imports and the resulting trade war they can ignite. A recent example is the various tariffs placed or threatened by President Trump at the start of his second term on goods from China, Mexico, Canada, and some European nations. The threat of a trade war created a risk-off environment, leading many traders to seek what they consider to be safer assets.
Strong tech performance
Just as correlation is seen when prices fall, the same can be true during periods of strong performance for tech stocks. The S&P 500 index, which is heavily concentrated in blue chip US tech stocks, was up 23% by the year-end 2024, marking a second consecutive year where the index had returned more than 20%. Meanwhile, bitcoin crossed the psychologically significant price point of $100,000 during 2024 as the asset closed the year with a 125% gain. This example of correlation has much to do with sentiment, as tech outperformance often buoys traders to consider other risk-on assets while market conditions are favorable.
BTC and tech stocks: when is correlation not found?
So, what are the circumstances where a negative correlation between BTC and tech stocks is generally found?
Crypto regulation developments
One scenario where bitcoin and tech stocks haven't historically shown correlation is immediately following major crypto-related legal and regulatory developments. One example is the June 2021 announcement that El Salvador would be the first country to adopt bitcoin as legal tender. BTC jumped 13% immediately following the news, while tech stocks were largely unmoved.
Localized financial or geopolitical uncertainty
Being part of a new alternative to conventional financial systems, bitcoin has also shown a decoupling to tech stocks during times of financial or geopolitical volatility in specific markets. This can be seen amid conflict, sanctions, or currency devaluations, where confidence in traditional banking systems drops and some traders move to protect their money.
Crypto industry crises
Negative events including hacks and crypto exchange collapses are another example of crypto-specific events that haven't always historically touched tech stock prices. Here, the sudden spike in negative sentiment brought by a crisis is often followed by a major sell-off of crypto assets. This was evident following the November 2022 collapse of crypto exchange FTX. Bitcoin fell 13% on the news that FTX wouldn't be acquired as initially reported. During this time, the S&P 500 saw prices hold steady while volume rose, possibly as a result of traders pivoting from crypto to the index.
The final word
Although there are no certainties in crypto, understanding the correlation between bitcoin and tech stocks can provide clues as to where BTC prices may move next, based on what's happening in tech. Think of this insight as another piece of the puzzle when building your own well-informed trading strategy that's grounded in fact, not hype and speculation.
Want other timely market insights right where you trade? You can have it with OKX Feed, a news aggregator for all things crypto that's integrated with the OKX platform. Using the tool, you can make news-driven decisions faster while filtering out what's not relevant to you.
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