A report from Coingecko reveals that the S&P 500 outperformed the crypto market in Q2 2024. This was also the case in the first quarter of the year when the S&P 500 posted a return of approximately 10.1% for investors.
In the second quarter of 2024, the total value of the cryptocurrency market fell by 14.4%, losing $408.8 billion and ending the quarter at $2.43 trillion. The market fluctuated between $2.30 trillion and $2.90 trillion throughout this period but could not reach new record highs.
At the same time, the S&P 500, a major stock market index, continued to rise, finishing the second quarter with a 3.9% increase. In simple terms, the relationship between the overall value of the cryptocurrency market and the S&P 500 weakened significantly.
In the first quarter, the two markets moved similarly most of the time, with a correlation of 0.84 (where 1 would mean they move the same). By the second quarter, this similarity dropped significantly, with a correlation of just 0.16, meaning they hardly moved in the same way anymore.
The S&P 500 is a comprehensive stock market index that tracks the performance of the 500 largest publicly traded companies in the United States. The index is designed to provide a broad representation of the U.S. stock market, covering around 80% of the total U.S. market capitalization. It includes companies across 11 major sectors of the economy.
To be included in the S&P 500, companies must meet certain criteria such as having a market cap of at least $8.2 billion, being based in the U.S., and having positive earnings over the most recent quarters.
The S&P 500 is considered a reliable indicator of the overall performance of the U.S. stock market and the broader economy. It is widely used as a benchmark for investment performance and as the underlying index for many index funds and ETFs.
Higher volatility for crypto
Coingecko noted that the cryptocurrency market experienced high volatility during Q2 2024. The value of the total cryptocurrency market and Bitcoin fluctuated much more than the S&P 500.
Specifically, the cryptocurrency market’s value changed by 48.2% over a year, and Bitcoin’s value changed by 46.7%. In contrast, the S&P 500 had much more stable values, with changes of only 12.7% over the same period.
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Bitcoin down by 11.9%
Further into the research, Coingecko revealed that after Bitcoin reached a new high of $73,098 in mid-March, its price fluctuated between $58,000 and $72,000. However, by the end of the quarter, Bitcoin’s value had decreased by 11.9%.
Coingecko added that although the fourth Bitcoin halving occurred on April 24, 2024, it did not significantly affect its price. Apart from the value of Bitcoin dropping in the second quarter, its trading volume also dropped, averaging $26.6 billion daily, a 21.6% decrease from the previous quarter.
One reason for Bitcoin’s price decline was the announcement that the German government was selling its Bitcoin holdings and that Mt Gox was moving its 140,000 BTC stash. These actions made investors worried and contributed to the drop in Bitcoin’s value.
Reduced Bitcoin mining hash rate
In the same second quarter of 2024, the total computing power used for Bitcoin mining dropped by 18.8%. This happened after it reached a record high on April 23, 2024. This decline is notable because it’s the first time the mining power has decreased in a quarter since the second quarter of 2022.
The Bitcoin hash rate refers to the total computational power being used to mine and process transactions on the Bitcoin network. It is a measure of the number of calculations (or “hashes”) that the network can perform per second. The hash rate is a crucial metric for the Bitcoin network because it reflects the overall computing power and security of the blockchain.
A higher hash rate means more miners are contributing their computing resources to the network, making it more secure and resistant to attacks. Also, a high, distributed hash rate indicates that the network is decentralized, with many different miners contributing their computing power. This helps prevent any single entity from dominating the network.
Coingecko also said that even though the mining power has dropped, the industry is very active. Companies like BitDigital, Hive, Hut 8, Terawulf, and Core Scientific are expanding into AI. Tether has invested $500 million in mining, and Block has developed a new 3nm mining chip.
The contrasting performances of the S&P 500 and the cryptocurrency market in the second quarter of 2024 highlight the evolving nature of financial markets. While traditional equities continue to attract investors with their stability and steady growth, the crypto market remains a realm of high volatility and rapid changes.
