It’s been a tough first quarter for both bitcoin and equities across the globe.

Interestingly, amid the downturn, the historically uncorrelated financial assets have moved pretty much in tandem since early February, forcing experts to search for reasons behind the growing relationship.

To start with, bitcoin bulls have been arguing since the early years that the cryptocurrency shares many of the characteristics of gold (a classic safe haven asset). For instance, many consider it a great store of value, given its limited supply of 21 million. Accordingly, the cryptocurrency is expected to put on a good show during times of stress in the broader financial markets.

Yet, since the S&P 500 index, the benchmark for equities across the globe, fell from a record high of $2,872 to $2,532 in the two weeks to Feb. 9, it should have been the perfect time for bitcoin to score gains and strengthen its safe-haven appeal.

However, the comparative study of bitcoin and S&P 500 reveals that wasn’t the case.

Comparison chart: Bitcoin and S&P 500

The above chart (BTC price as per Coinbase) shows:

Both bitcoin and the S&P fell below the 200-day moving average (MA) in the first half of February.

In the subsequent weeks, both assets witnessed a corrective rally and ended up forming a double top bearish reversal-like pattern.

Furthermore, bitcoin has been leading the S&P 500 index by a few days.

For instance:

BTC bottomed out at $6,000 on Feb.6, while the S&P index did so at $2,532 on Feb. 9.

The near 90-degree corrective rally in BTC ran out of steam at $11,775 on Feb. 20, while the “V-shaped” recovery in the S&P faced exhaustion on Feb. 27.

BTC resumed its sell-off on March 5, while the S&P found fresh offers on March 13.

Both assets fell back to their respective 200-day moving average levels last week.

Clearly, the correlation has strengthened and it appears as though bitcoin is working as a lead indicator, or a risk barometer, for the broader financial markets, and an argument can be made that bitcoin is not holding up its reputation as a “digital gold” or a safe-haven asset.

That said, it’s worth noting that correlation does not mean causation – that is, BTC is not necessarily causing the drop in the S&P, or vice versa.

The S&P 500 index, or the equity markets, in general, will likely be reporting losses for the first quarter, largely due to fears of faster Fed rate hikes and the rising bond yields, political turmoil in Washington and increased odds of US-China trade war.

Meanwhile, bitcoin has taken a hit, in part due to deeper crackdown on cryptocurrency trading in South Korea and China. Furthemore, the cryptocurrency was due for correction following a staggering rally to an all-time high of $20,000 in December.

So, while there is no common thread between the drop in equities and bitcoin, the correlation between the two has strengthened – and that’s most likely because the investor community is still not ready to accept notoriously volatile bitcoin as a safe haven asset such as gold and U.S. treasuries. Not yet, anyway.

Stock prices image via Shutterstock