Correlation Between Crypto and Equity Markets

JPMorgan analysts explored the relationship between equity sectors and cryptocurrencies, finding that bitcoin is most correlated with small-cap tech stocks, specifically within the Russell 2000 tech sector.

According to the report by lead analyst Nikolaos Panigirtzoglou, this correlation includes both bitcoin and altcoins, although it is generally stronger with bitcoin. This trend is attributed to the dependence of crypto on venture capital and the focus of blockchain innovation in smaller tech firms rather than larger corporations.

The Russell 2000 Index tracks the smallest 2,000 stocks in the broader Russell 3000 Index.

The analysis comes after a recent correction in both U.S. tech stocks and cryptocurrencies. Analysts noted that the crypto-equity correlation has remained positive since the pandemic, largely due to retail investors’ access to leverage and the intertwined nature of technology in both markets.

Furthermore, the analysis found that this correlation varies over time, often peaking when the tech sector faces significant changes. In years of strong tech performance like 2020 and 2024, or downturns such as in 2022, the correlation between bitcoin and equities became more pronounced. Overall, this suggests a fundamental link between crypto and the tech sector, especially during significant evaluations by equity investors.