December 7, 2021 - 3:15pm

In ‘Why Bitcoin is tracking the stock market’ Philip Pilkington writes that Bitcoin is ‘growing up’ and becoming a Wall St plaything that finance bros use for ‘fun and profit’. It is for this reason, he writes, that the cryptocurrency is heavily correlated with the stock markets:

“Bitcoin followed the stock markets, with the S&P500 falling around 3.5% over the same period…. In the past two years, moves in the stock markets explain anywhere between 30% and 40% of moves in the Bitcoin market.”
- Philip Pilkington, UnHerd

This point is true enough in recent times. A recent NYDIG weekly research report confirms as much: there has been strong Bitcoin correlation with equities since March 2020, and this represents increased institutional investor activity since that time.

But even still, Bitcoin can represent a useful diversifier. For example, over the last year, investing in the S&P 500 returned 23.85% versus Bitcoin’s 174% (even after this recent dip). And on a 10-year basis, Bitcoin has risen 163% per year, whereas the S&P500 has only grown 13.8% per year. That marks a dramatic increase in the purchasing power of Bitcoin holders.

Importantly, Bitcoin is not anti-finance but it is anti-central banking. Contrary to Pilkington’s argument, the established monetary system is on very shaky ground and Bitcoin can serve as an alternative to that. There is a very real battle going on for the future of our monetary freedom, and the world will have to decide whether it wants an open monetary standard with a strict hard cap of 21 million Bitcoins, or whether it wants central banks pumping trillions and trillions of dollars into the economy. Given that the current monetary system is in the process of rapid devaluation and the cost of living is rising rapidly, Bitcoin seems like the better bet.

It’s therefore not surprising that day traders want to get involved in Bitcoin. In the western world, people are rushing to a multitude of investments, whether they are stocks, property or memecoins. Trust in central banks and governments are decreasing, particularly when the latter are proposing their own digital currencies (such as the ‘CBDC’ surveillance coins) that will be detrimental to individual freedom. Bitcoin, meanwhile, is an open standard that allows users to operate and exchange as they wish.

Thus to portray Bitcoin as a tool of the Wall St establishment misses the point. For people living under authoritarian regimes, Bitcoin is a vital way to protect their ability to transact. This might not mean much to you if you’re coming from a place where you have access to fiat banking, credit and so forth. But if you, like over a billion people worldwide, don’t have a physical address with a street name and number, or identity documentation, or live under a highly inflationary regime, you would appreciate the value of Bitcoin’s open system.

Stephan Livera hosts the Stephan Livera Podcast and he is also Managing Director, Swan Bitcoin International. Follow him on Twitter @stephanlivera.