Bitcoin pulls away from software stocks as Iran war, AI reshape market dynamic
BTC correlation with an ETF tracking software comany stocks broke sharply from near-total alignment to near zero after the conflict started.
What to know:
- Bitcoin has outperformed software stocks since Feb 28, gaining over 5% while the iShares Expanded Tech-Software Sector ETF has fallen more than 2%, marking a clear short-term divergence after months of tight correlation.
- Correlation between the two assets collapsed from near 1.0 in early February to 0.13 after the conflict began, before partially recovering to around 0.7.
IGV, in contrast, has fallen more than 2% since the conflict began. That gap suggests investors are starting to treat bitcoin and software stocks differently, at least in the near term.
Until recently, the two had moved closely together. Over the past three months, bitcoin fell 26% and the ETF lost 23%. Year to date, both are lower by about 21%. Over five years, bitcoin has gained 18% compared with 10% for IGV. In other words, both have moved in the same direction, but the cryptocurrency has done so with much greater volatility.
That is also clear in their declines. Bitcoin had fallen roughly 50% from its October all-time high, while IGV, which peaked slightly earlier, fell about 35% from its own top.
The correlation data tells the same story. From early February, bitcoin and IGV were almost perfectly correlated, close to 1.0, meaning they were moving nearly in lockstep. After the war began, that relationship broke down sharply, with the correlation dropping to 0.13, a level that signals near decoupling, before rebounding to around 0.7. The figure can range between -1.0 and +1.0, with 0 indicating no correlation at all.
