Now Bitcoin is Surging, Will MSTR and MARA Benefit Further?

As we can see from the chart that Bitcoin rise from 16 oct to surge to more than $33,000. At the same time, we are also seeing some of the crypto stocks and other assets gaining.

In this article I am trying to establish how MSTR and MARA would be correlated with Bitcoin as compared to Gold and S&P 500. We do understand that Bitcoin price is closely linked to several financial assets, but there are different reasons for its correlation with certain precious metals and stocks.

Bitcoin’s historic correlations vary across timeframes

According to a report published in October 2022 by the Multidisciplinary Digital Publishing Institute, they have arrived at several following key conclusions regarding Bitcoin’s correlations with traditional financial assets, including:

1. The extreme volatility of the Bitcoin market means that long-term correlations are stronger than short-term correlations.

2. The “positive linkage between Bitcoin and risk assets increases during extreme shocks,” such as during COVID-19.

3. Bitcoin can be positively correlated with risk assets and negatively correlated with the U.S. dollar.

Crypto-specific stocks

We have seen how a few crypto-related equities have been more correlated to Bitcoin than any other assets on the market.

For example, we have seen $MicroStrategy(MSTR)$ , $Marathon Digital Holdings Inc(MARA)$ risen by more than 10% in yesterday (24 Oct 2023) trading.

Correlation Coefficient for BTC/MSTR vs BTC/Gold vs BTC/S&P 500

The 90-day correlation coefficient for BTC/MSTR have remained near 0.6 for the last 3 months. For MicroStrategy (MSTR), the coefficient has fallen no lower than 0.5 since August 2023.

As compared to BTC/GOLD $Gold - Dec 2023(GC2312)$ , it has outperformed Bitcoin so far this year while also showing greater volatility. This could be best used as proxies for Bitcoin, which cannot be bought through our Tiger brokerage trading account.

Compared to the coefficient for BTC/S&P 500 $S&P 500(.SPX)$ , BTC/MSTR has remained higher.

Correlation Coefficient for BTC/MARA vs BTC/Gold vs BTC/S&P 500

Similar to MSTR, MARA coefficient has also remained above 0.5, higher than that of BTC/Gold and BTC/S&P 500.

We can trade MARA as proxies to Bitcoin which we are not able to do so via our Tiger brokerage trading account.

Why these 2 stocks are closely correlated to Bitcoin is because of their substantial holdings of Bitcoin.

One reason these two stocks are so closely correlated to Bitcoin has to do with the balance sheet of their respective companies. They all have a substantial amount of Bitcoin holdings.

They are among the top 2 public companies holding Bitcoin.

Bitcoin’s correlations are not a crystal ball

We need to be aware that Bitcoin trading is very volatile and its has large price swings, so these correlations can change anytime and with very short notice.

But it is a good information to help to see why the stocks could be performing this way.

Summary

Based on what I have shared, do you think this information would be useful in helping us to understand why crypto stocks is moving this way, it is not just because of a surge in Bitcoin price.

And why do Gold and S&P 500, we do not see a high surge?

Appreciate if you could share your thoughts in the comment section if it is useful to understand the correlation between crypto stocks with Bitcoin versus other assets like Gold and S&P 500.

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.