Fidelity’s Timmer Says Selloff Tightened Bitcoin’s Link to Stocks

Bitcoin’s correlation with stocks increased during last week’s market selloff, according to Fidelity’s Jurrien Timmer, as several assets moved more closely with equities. The shift also affected real estate investment trusts and a basket of shares excluding artificial-intelligence stocks, according to BeInCrypto’s account of his analysis.

Timmer, Fidelity’s director of global macro, described a convergence in correlations when markets fall sharply. His observation puts the focus on how investments behave under pressure, rather than whether they belong to different industries or asset classes.

The report said the correlation between the basket excluding AI stocks and the S&P 500 rose from 10% earlier in the week to 40% by its end. It did not provide a corresponding numerical change for Bitcoin, so the cryptocurrency’s increase cannot be quantified from the reported figures.

For investors, the distinction matters because owning different assets does not necessarily mean holding independent sources of risk. If those assets become more closely aligned during a decline, a portfolio may offer less protection than its mix of holdings initially suggests, even without every investment moving identically.

Correlation measures the strength of a relationship between investment returns, not whether two assets have the same underlying purpose. A positive reading indicates that returns tend to move together. Diversification does not require an opposite relationship, but its benefits can diminish as positive correlations strengthen.

Separate historical research published by Fidelity provides context for Bitcoin’s changing relationship with traditional markets. In a three-year period ending in March 2024, the firm measured Bitcoin’s correlation with stocks at 0.53 and with bonds at 0.26. Those readings indicated potential diversification benefits, not independence from broader market movements.

Fidelity’s research also distinguished diversification from protection during equity downturns. Its examination of the stock market’s worst months found that bonds and gold delivered better median returns than Bitcoin, while noting the relatively small sample available. Bitcoin performed more strongly during months when stocks were among their best performers.

Volatility is another consideration separate from correlation. Fidelity found that adding even a small Bitcoin allocation could meaningfully increase simulated portfolio volatility. The firm cautioned that its findings reflected historical data and that Bitcoin’s portfolio characteristics could change as ownership and cryptocurrency markets evolve.

The question following the selloff is whether the tighter relationships persist or ease as market conditions change. Timmer’s reported observation describes what happened during a period of stress, rather than establishing a permanent relationship. Fidelity’s broader research likewise frames Bitcoin’s diversification potential as variable, with past results offering no guarantee of future behavior.