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Bitcoin – a certain kind of hedge?

Chart of the week
Currencies
Equities
Macro

4/25/2025

Short-term high correlation with the Nasdaq should not be over-interpreted

conceptual image of bitcoin on motherboard
Bitcoin – a certain kind of hedge

Since the beginning of 2023 has clearly outperformed gold and the .[1] For a long time, “digital gold,” as some enthusiasts characterized bitcoin, was seen as an attractive way to become independent of stock markets, especially on Wall Street, even in turbulent times. However, recent weeks have shown again that bitcoin can also come under pressure in times of uncertainty and market weakness.

Euphoria about the launch of bitcoin and talk of holding bitcoin reserves under Donald Trump had driven the bitcoin price sharply higher in the second half of 2024. But so far this year bitcoin has temporarily taken a significant hit. The general increase in in response to the new president's policies has made investors skeptical about currencies too. And crypto’s weakness occurred almost in lockstep with weakness in the Nasdaq: The between the two asset classes reached an exceptionally high level in February and March. It should be noted, however, that such a high correlation only exists in certain market phases. Not only historical analysis shows that the correlation is much lower over longer periods. For example, since Donald Trump announced his wide-ranging tariffs on April 2, 2025, Bitcoin has once again significantly outperformed the Nasdaq.

In periods of heightened uncertainty it was not surprising that gold, the perceived classic ,[2] showed its strength; it has outperformed Bitcoin and the Nasdaq by a wide margin so far in 2025. So it seems that nervous investors in turbulent times still place their trust in traditional physical gold rather than “digital gold” in the form of Bitcoin.

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Investment Traffic Lights

7/4/2025

The monthly Investment Traffic Lights provide a detailed market analysis and our view on developments in the main asset classes. 

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Bitcoin had the edge over the last two years

Chart

Line chart with 3 lines.
indexed, 1/1/2023 = 100

The chart has 1 X axis displaying

. Data ranges from 2023-01-02 00:00:00 to 2025-04-23 00:00:00.
The chart has 1 Y axis displaying

. Data ranges from 98.46 to 637.51.
End of interactive chart.

Chart

Line chart with 3 lines.
indexed, 1/1/2025 = 100

The chart has 1 X axis displaying

. Data ranges from 2025-01-01 00:00:00 to 2025-04-23 00:00:00.
The chart has 1 Y axis displaying

. Data ranges from 79.06 to 130.46.
End of interactive chart.

Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 4/23/25

In general terms we can say that Bitcoin lost just under 32% between its high of slightly above 109,000 dollars on January 20 and its significant interim low on April 7. By comparison, the maximum loss during the Nasdaq's recent downtrend was just under 27%.

However, bitcoin has since recovered somewhat more strongly than the Nasdaq. A possible support factor for bitcoin could be the increasing questioning of the U.S. dollar as a stable global reserve currency. The fell sharply in April. 

It is quite conceivable that bitcoin could fall again (along with the Nasdaq) if the market rally ends and there is another sell-off as risk sentiment deteriorates again. However, bitcoin could remain in demand in the short term if the dollar continues to weaken. In our view, bitcoin is not yet a and is likely to remain volatile for the foreseeable future. However, market perceptions are slowly changing and it remains to be seen if there is a growing belief in bitcoin as a against geopolitical and macroeconomic tensions.

1

All market data, unless otherwise quoted, from Bloomberg Finance L.P. as of 4/23/25

2

Financial safe havens are investments or assets that are expected to retain or increase in value during times of market turbulence

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