Crypto and stocks: why correlation rises in a sell-off

What does crypto correlation with stocks actually measure?

A correlation coefficient measures how closely two prices move together over a period. A value near 0 means the two move independently. A value near 1 means they rise and fall together. A value near negative 1 means they move in opposite directions. The coefficient says nothing about size: a small move in stocks and a large move in Bitcoin can still show a high value.

For a portfolio, the coefficient answers one practical question: when stocks fall, what does crypto do? Investors who hold crypto to diversify a stock portfolio rely on a low value. The sections below show how that value changed, why it rises in a sell-off, and why the period you pick matters for the answer. The documented figures come from one public source, so you can verify each of them, and the last sections turn them into a short working method.

How much did crypto and stock correlation rise?

The IMF published the key figures in a blog dated 11 January 2022. The correlation between Bitcoin and the S&P 500 was 0.01 over 2017 to 2019 and rose to 0.36 over 2020 to 2021, an increase of 0.35. The first value describes 2 assets that behaved almost independently, and the second describes a clear link.

The blog explains the rise by growing adoption: increased adoption has coincided with significantly higher correlation with traditional holdings such as stocks, and assets increasingly moved together. These are the IMF’s measurements for those periods. This page does not extend them to later years, because a value for 2025 or 2026 needs its own calculation.

Why does crypto correlation with stocks rise in a sell-off?

The IMF notes that spillovers between crypto and equity markets tend to increase during market volatility, such as the March 2020 turmoil, or during sharp Bitcoin price swings, such as early 2021. In calm weeks, each market follows its own news. In stress, one common driver takes over: investors cut risk everywhere at once.

3 mechanics explain the shared move. Holders sell the assets that are easiest to sell to raise cash. Lenders ask for more collateral when stocks fall, and borrowers sell crypto to meet the call. Funds that trade both markets reduce total risk, which sells both. The same people hold both assets, so their needs link the prices.

How did adoption link Bitcoin to stock markets?

Adoption brought crypto into the same accounts, funds, and risk systems as stocks. When one risk desk or one portfolio manager decides across both, a signal for one asset becomes a signal for the other. That shared decision layer is a plain reason why the coefficient rose between the 2 IMF periods.

Access widened again on 10 January 2024, when the SEC cleared several spot bitcoin exchange-traded product shares for listing on national securities exchanges. The chair stated that the Commission did not approve or endorse bitcoin. Products inside ordinary brokerage accounts add another path from stock-market moods to Bitcoin demand.

Does crypto still diversify a stock portfolio?

The IMF draws the consequence directly: a higher correlation limits the perceived diversification benefits of crypto and raises contagion risk. Diversification works when an asset holds up while others fall. If crypto falls with stocks in a sell-off, it adds to the loss at the moment a portfolio needs support.

The IMF also states that increased co-movement and spillovers can destabilize financial markets, and that given the volatility and valuations of crypto, the co-movement could soon pose risks to financial stability, especially in countries with widespread crypto adoption. For a reader, the practical step is to test the claim of diversification with data, not to assume it.

How can you measure crypto correlation with stocks yourself?

Use 4 steps. Pick the pair, for example Bitcoin and a broad stock index. Choose a window, such as 90 days of daily returns. Split the data into calm weeks and stress weeks, using the largest weekly falls in stocks as the stress set. Compare the two coefficients. A stress value well above the calm value means the link grows when you need it least.

Repeat the calculation each quarter and keep the results in one table. A single number can mislead, since the value depends on the window and the data source. A trend over several quarters is more reliable, and a jump in the stress value is a signal to review position sizes.

What can a decision maker do with a rising crypto correlation?

Size crypto as if it falls with your stocks in a bad month, because the stress coefficient says it may. Check whether your lenders accept crypto as collateral and whether a stock drop could trigger calls on both. Keep enough cash outside both markets to meet obligations without selling into a fall.

Teams in Singapore, ASEAN, and Hong Kong can add this test to a treasury review. A 30-minute pre-diagnostic with EQOS Asia scores your own case, and the Λ simulator lets you test a first version yourself. This page is general information, not investment advice, and its facts were consulted on 23 October 2026.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile