The S&P 500 Index has risen by 60% over the past two years, but the price increase of Bitcoin during the same period has shattered this record.
As the S&P 500 Index hit a historical high on Friday, the U.S. stock market bull market is about to celebrate its second anniversary. Despite the cryptocurrency market being in a slump for several months, this period has also allowed us to see how much Bitcoin has risen during this time.
As emphasized by the financial newsletter "Opening Bell Daily," since the gradual retreat of the stock market bear market two years ago, the S&P 500 Index has risen by more than 60%, reaching about 5,800 points. However, during the same period, the price of Bitcoin has risen by about 220%, from about $20,000 to the current price of over $63,000.
During the same period, the technology stock-heavy Nasdaq Composite Index rose by 78%, from around 10,300 points to 18,350 points, while the Dow Jones Industrial Average rose by 43%, from 29,300 points to around 42,800 points. The bull market on Wall Street over the past two years is simply incomparable to Bitcoin.
For several months, Bitcoin has struggled to recover new peak prices, but analysts say there are several reasons why the asset has shown a similar trend to major stock indices, from macroeconomic factors to products that allow traditional investors to invest in Bitcoin without having to buy and hold cryptocurrencies.
In November 2022, Bitcoin fell to a low of around $14,750, driven down by panic following the collapse of the well-known cryptocurrency exchange FTX. At the same time, due to the Federal Reserve's astonishing rate hikes, which sparked concerns about high unemployment, the S&P 500 Index fell to 3,600 points a month earlier.
When Bitcoin soared to $73,000 in March, the S&P 500 Index also hit a historical high. Although the index continues to hit historical highs, Bitcoin has since fallen to a low of $54,000. As of the time of writing this article, the price of the asset is still 14% lower than its peak price, trading at $63,250.
However, some analysts believe that the price of Bitcoin may rise before the end of the year. On Friday, Ryan Lee, Chief Analyst at Bitget Research, told Decrypt that, based on expectations for the U.S. presidential election, the price of Bitcoin could be between $50,000 and $80,000.
Greg Magadini, Director of Derivatives at Amberdata, told Decrypt that the returns of Bitcoin and the S&P 500 Index over the past two years have been comparable, partly because the Federal Reserve has increased its balance sheet since 2008. He said that these two asset classes represent assets owned and owed by the Federal Reserve, both benefiting from increased liquidity, as this figure has exceeded $7 trillion.
"Despite slightly higher interest rates, we may overlook what has happened since the financial crisis," he added, pointing out that the Federal Reserve's balance sheet has increased significantly from $800 billion.Brian Rudick, Head of Research at market maker GSR, told Decrypt that the overlapping bull market of Bitcoin and the S&P 500 Index since the end of 2022 is partly coincidental.
He said that both asset classes are influenced by macroeconomic factors, such as the Federal Reserve's monetary policy. However, he explained that the rise in the stock market and the rise in Bitcoin prices are "not entirely caused by the same thing."
He said: "For the S&P Index, private profits of American corporations have grown significantly during this period, and expectations for future profits are also high. For Bitcoin, there is a very, very positive special event, which is the launch of a spot Bitcoin ETF."
According to data from CoinGlass, since its launch in January, the spot Bitcoin ETF has attracted $18.6 billion in funds. This has opened a major avenue for investors to speculate on Bitcoin prices, and Rudick said, "It's hard to underestimate how significant its impact is."
Rudick pointed out that the correlation between Bitcoin and stocks has been at a historical low, but more participation from institutional investors will change this dynamic in the foreseeable future.
"The correlation has been rising," he said. "As cryptocurrencies become more institutionalized, their performance will become more like other asset classes."