Wednesday 14 March 2018

Bitcoin Signalling Major Risk Off Trade?

A look at the relationship between bitcoin returns and other asset class returns over the last year throws up some interesting details. 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 higher bond yields which could trigger a move 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

A look at the relationship of bitcoin itself with other asset classes over the last year reveals some additional info. We can see 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


No comments:

Post a Comment