What Type of Asset is Bitcoin? An Answer from the Stock Market

Abstract

In recent years, bitcoin has been at the center of a debate: is it a financial asset or not? If it is an asset, what kind of asset is it? Is it a tradable, speculative asset, or is it a long-term investment? The debate has largely unfolded around the real nature of Bitcoin and its correlation with other asset classes. Some scholars have discussed the correlation coefficient of bitcoin using the S& P 500 Index, the Volatility Index, and gold. However, the debate is now sufficiently mature to discuss the reasons determining its correlation with other assets. We study the correlations of Bitcoin and one benchmark, a stock market index-specifically, the Nasdaq 100 Index. Our focus is on the correlation between Bitcoin and the Nasdaq 100 as a proxy for the most representative technology stocks. We show that the correlation between the two has grown substantially since 2018, and has increased more since the beginning of the COVID-19 pandemic.