Assistant Professor of Economics Peter Wang, with St. Mary’s College of Maryland Foundation member Bluford Putnam (senior consultant, Sterling Trading Tech), co-authored a case study published in Commodity Insights Digest, winter 2025 issue. The case study is titled “How the Pandemic Triggered a Sea Change in the Way Bitcoin Traded.”
In the case study, the authors assert that from its debut in 2009 until the Pandemic of 2020, Bitcoin prices traded largely in a manner that was uncorrelated to the major U.S. equity indices, but that this abruptly changed in the spring of 2020.
“Prior to the Pandemic of 2020, Bitcoin clearly provided a significant degree of diversification to an equity-dominated portfolio even if it also was incredibly volatile on its own,” the authors reveal.
“The Pandemic caused major economic shocks, resulting in the U.S. federal government providing $5 trillion of fiscal stimulus, the Federal Reserve lowering short-term rates effectively to zero and expanding their balance sheet with the purchase of $5 trillion of U.S. Treasury debt and mortgage-backed securities.” Equally important, the authors argue, many jobs transitioned to work-from-home. “With time on their hands and money in their pockets, many people became active retail traders in stocks as well as in cryptocurrencies. Almost overnight the relationship between Bitcoin prices and U.S. equities indices shifted from uncorrelated and unstable to highly correlated.”
Enough trading in Bitcoin had been done by the time of the Pandemic that by 2021, the Securities Exchange Commission moved to authorize cryptocurrency exchange-traded funds (ETFs). “The first Bitcoin ETF, symbol BITO, started trading in October 2021, and reached over $1 billion in assets in just two days. A new era of Bitcoin and cryptocurrency trading was on its way.”
The authors observe these patterns and consider future projections for Bitcoin, associating it potentially with gold as part of a new challenge to sovereign currencies.
