Raoul Pal discusses why the connection between bitcoin and stocks is to be expected

Research conducted by the BlockCrypto has picked up a correlation between Bitcoin and stock markets but co-founder of Real Vision, Raoul Pal, says it’s not a surprise considering the currency attributes of Bitcoin. “It has the attributes of a currency and a bit of a commodity,” Pal commented, “currencies are what's known as Bayesian in distribution—which means that they have shifting variables that affect them.”

Pal highlighted bitcoin’s outperformance amid recent correlation by stating,

The equity market has basically underperformed over an extended period, then recently kind of held its own against it. Gold underperformed by 50%. Bitcoin [is] the only asset that killed it. Completely outperformed. Over-time even with the correlation between equities and bitcoin, the risk-reward is in favor of bitcoin.”

Why it matters: Most people see rising stock prices as being a sign of a healthy economy. This isn't always the case, as rising stock prices can also demonstrate inflation in the economy. If we look at many instances in history when an economy experienced high levels of inflation, the value of companies' equity also rose with the rate of inflation. The reason for this is simple, many companies have hard assets and revenue streams that will rise with the level of inflation. Bitcoin is probably benefiting from this same trend, and will likely continue to go up when measured in fiat currency terms.

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