Bitcoin (BTC) has the highest correlation with small-cap technology stocks, specifically those in the Russell 2000 tech sector, according to a new JPMorgan report.
In an analysis led by Nikolaos Panigirtzoglou, JPMorgan analysts found that both Bitcoin and altcoins exhibit a strong correlation with small-cap tech stocks, though Bitcoin’s correlation is consistently higher.
“The fact that crypto is more correlated with smaller rather than the largest tech stocks makes sense due to crypto’s reliance on venture capital (VC) funding and blockchain innovation, which is typically the focus of smaller tech firms rather than industry giants,” the analysts wrote.
Crypto-Equity Market Correlation Remains Strong
JPMorgan revisited the crypto-equity correlation following Monday’s simultaneous correction of U.S. tech stocks and cryptocurrencies. The report noted that since the pandemic, crypto and equities have maintained a structurally positive correlation, driven by:
- Retail investors using leverage in both markets.
- The technology-driven nature of cryptocurrencies and growth stocks.
The Russell 2000 Index tracks the smallest 2,000 stocks within the broader Russell 3000 Index, making it a key benchmark for small-cap tech companies.
Tech Sector’s Influence on Bitcoin
JPMorgan’s research shows that Bitcoin’s correlation with equities tends to peak during major tech sector shifts. In high-growth years like 2020 and 2024, and during sell-offs like 2022, Bitcoin’s price movements closely followed tech stock trends.
“This pattern supports the idea that crypto is fundamentally linked to tech, especially when equity investors reassess the tech sector more significantly,” the report stated.
With the increasing overlap between crypto and traditional financial markets, analysts believe Bitcoin’s price trajectory will continue to be heavily influenced by tech sector performance and broader equity market trends.
