Which macro variables have recently been influencing the price of Bitcoin is a topic of continuing discussion in the cryptoasset community. Some contend that Bitcoin is just another “risk-on” trade like any other and that its value has a strong correlation with equity prices. There is some truth to that, as Bitcoin is currently still one of the most volatile financial instruments. In fact, similar to the S&P 500, Bitcoin sold off during the Covid-shock in February/March 2020, recovered similarly, and has been trading downwards in a similar fashion since the beginning of this year. In this report, we present a novel quantitative approach in order to disentangle the main macro drivers that are able to explain Bitcoin’s past price performance.

Our main findings are that Bitcoin price changes have been mainly associated with changes in global growth expectations in the period from 2015 until today. However, in the more recent history, Bitcoin price changes have been mainly associated with changes in monetary policy expectations. All in all, we are able to explain around 83% of Bitcoin price variations via changes in our macro factors which supports the view that Bitcoin has become a mature macro asset. The report is written by André Dragosch, Head of Research at Deutsche Digital Assets.

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