Investigating the correlation of S&P 500 and Nasdaq 100 with Bitcoin price
Introduction
Many analysts and investors are always looking for information on the stock market indexes to understand the Bitcoin price movement. In this context, Plan B created a model correlating the Standard and Poor´s 500 index (S&P 500) and Bitcoin price [1]. But, can Nasdaq 100, the index made up of the largest non-financial companies listed on the Nasdaq stock exchange, be more correlated with Bitcoin price than S&P 500?
In this study, the S&P 500 and Nasdaq 100 were selected to evaluate the correlation between these indexes and Bitcoin price. Linear and polynomial models were applied for finding the answer to this question.
Weak correlation
Prices and stock market indexes from Investing were used [2].
The first general idea extracted from Figure 1 is that there is a weak correlation between these indexes and Bitcoin price, instead, Bitcoin proves to have a life of its own and goes its way.
Second, 8 years ago Bitcoin price was lower than both indexes, but in 2022 the price is higher, demonstrating the great value of the Bitcoin network and how it has been profitable since its establishment.
New to trading? Try crypto trading bots or copy trading
Models
As can be seen in Figure 2, there is a weak positive correlation between Bitcoin Price and the S&P 500 index, once a strong correlation is indicated for a coefficient of determination (R2) closest to 1. The linear model found an R squared of 0.8316 and 0.9006 for the polynomial model.
The important information from Figure 3 is that Nasdaq 100 index is stronger correlated with Bitcoin Price than the S&P 500 correlation. The linear model for Nasdaq 100 reached an R2 of 0.8355 and 0.9148 for the polynomial model. In other words, if you are looking for information from the stock market, probably using Nasdaq 100 index will be more effective.
Analyzing just the last year, the coefficients of determination presented no acceptable linearity, R² = 0.6483 (Linear) and R² = 0.6991 (Polynomial) for S&P 500, R² = 0.7094 (Linear), and R² = 0.7308 (Polynomial) for Nasdaq 100, highlighting the unique path that Bitcoin follows, influenced by the global economy, but on its way exclusive.
Conclusion
The simple proposal presented here was an excellent opportunity to show traders and investors a new way to look for pieces of information from the stock market. In addition, the models showed Nasdaq 100 index could be more useful than S&P 500 in the way to understand the Bitcoin price movement.
If you like this content, consider the tip:
BTC: bc1qljlmuwq9gyvn7uhvwwypsj4x8hcetuzhw9quh0
BNB: bnb159am7huy53mg7sygnklrtxkahkdk2qxzmnk0gw
BUSD: bnb159am7huy53mg7sygnklrtxkahkdk2qxzmnk0gw
Acknowledgments
The author is grateful to Satoshi Nakamoto, Hal Finney, Nick Szabo, Changpeng Zhao, Sabrina Moraes, and André Fauth.
References
Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing
