January was a challenging month for most risk assets, including bitcoin, which ended the month down 16.1%. Bitcoin is up 11.2% over the trailing 12-month period and 124% per annum over the last 3 years.
In equity markets, the S&P 500 returned -5.2%, its biggest monthly drop since the pandemic took hold in March ‘20, and growth stocks reached correction territory after touching an all-time high in November ‘21. Yields have soared on the prospect that the Federal Reserve will likely deliver multiple rate hikes this year and reduce bond purchases.
Given the absence of any materially negative, crypto-specific catalysts, it appears the bitcoin sell-off was mostly attributable to macro factors. Bitcoin has historically been uncorrelated to other asset classes such as equities. However, correlations to equities have increased since the start of the COVID-crisis, with bitcoin’s rolling 90-day correlation to U.S. equities ranging roughly between 0.2 and 0.5. In recent weeks, correlations have hit the top of that range as equities have sold off.