JPMorgan analysts have identified that Bitcoin exhibits its highest correlation with small-cap tech stocks, particularly those in the Russell 2000 tech sector. This correlation typically peaks during significant market movements, such as strong performance or sell-offs within the tech sector.
The research, led by managing director Nikolaos Panigirtzoglou, highlights that this trend is not exclusive to Bitcoin, as altcoins also show a similar correlation, albeit typically lower. The analysts attribute this phenomenon to the crypto’s reliance on venture capital and the focus on technological innovation within smaller tech firms rather than larger entities.
The Russell 2000 Index, which tracks the smallest 2,000 stocks in the broader Russell 3000 Index, serves as a key benchmark for this analysis.
Following a recent correction in U.S. tech stocks and cryptocurrencies, the analysts revisited the correlation between crypto and equity markets. Their findings suggest that, since the pandemic, the relationship between these markets has remained structurally positive.
Two primary factors contribute to this ongoing correlation: the influence of retail investors, who utilize leverage in both sectors, and the technological nature that links crypto and tech stocks.
The correlation has been notably pronounced during years of tech market outperformance, such as in 2020 and 2024, and during downturns like in 2022.
According to JPMorgan, this relationship reflects a fundamental link between the crypto market and the technology sector. As equity investors reassess the tech landscape, the correlation between Bitcoin and small-cap tech stocks will likely remain significant, impacting investor strategies in both arenas.
