Is crypto correlated to stocks? Yes and no. During normal times, correlation wanders. But during crashes, everything correlates to 1. The diversification benefit disappears exactly when you need it.
Hypothesis HY10013
Is crypto correlated to stocks? Yes and no. During normal times, correlation wanders. But during crashes, everything correlates to 1. The diversification benefit disappears exactly when you need it.
Trading hypothesis
What traders get wrong
False assumption:
"Crypto is uncorrelated. It's digital gold / inflation hedge / diversifier."
Truth:
Correlation is regime-dependent: low during normal times (diversification illusion), high during stress (diversification failure).
Problem for trader:
Crypto is a risk asset, not a hedge. Macro drives crypto when macro is scary.
Key takeaways
What you should consider as a trader
- Correlation spikes in crashes - March 2020, crypto fell with stocks.
- Fed drives everything - Rate hikes killed crypto in 2022.
- 'Uncorrelated' is bull market luxury - Risk-off hits all risk assets.
- Digital gold failed the test - Bitcoin crashed during 2020 COVID panic.
- Portfolio diversification is limited - Don't expect crypto to hedge equity.
Data you need
Understand conditional correlation
Data points:
- Rolling correlation BTC vs SPY
- Regime-conditional correlation
- Macro sensitivity metrics
- Correlation breakdown alerts
Comparison of data sources
Where to get crucial data feeds
| Source | Availability | Notes |
| TradingView | ⚠️ Partial | Basic correlation charts. |
| Portfolio analytics | ⚠️ Partial | Backward-looking. |
| **Madjik** | ✅ Yes | 🚀 Get API Access Now |
Available metrics for this hypothesis:
| Metric | Description | Change dimensions | Time dimensions | How to use | API spec |
| `ME10014` | Correlation | • Absolute Value (value) • Relative Change (relchg) • Score 0-100 (score) | • Past 7 Days (past7d) • Past 30 Days (past30d) • 90d | Example | API |
Clean data for AI, A2A, MCP, etc.
Science behind hypothesis
Research supports this hypothesis
Studies show BTC-SPY correlation exceeds 0.8 during market stress vs 0.3 normally.
Bottom line
Diversification fails when you need it most. Understanding regime-conditional correlation helps you build portfolios that actually protect in crashes. Madjik calculates rolling and stress-conditional correlations, showing you when your 'diversified' portfolio will move as one.
Practical use
How to use this data in trading:
Identify correlation regimes to determine when BTC provides diversification vs moves with equities.
Detailed examples with Python code, AI agent integration (MCP/A2A), and risk analysis:
| `ME10014` | Correlation Trading Guide | Example → |
API Documentation: docs.madjik.io
For informational purposes only. Not financial, investment, tax, legal or other advice.