Bitcoin Synchronizes with Stocks in Market Crashes: How to Protect Your Portfolio

Binance Research has modeled three strategies to determine which one better withstands market crashes. The study found that even Bitcoin may not behave independently of the stock market, with its movements synchronizing with stocks during major market shocks.

In March 2020 and August 2024, this synchronization was observed. To protect a portfolio from drawdowns without giving up Bitcoin, Binance Research analyzed three strategies: keeping 97% of a portfolio in Bitcoin and spending the rest on options, diversifying into other assets, or using derivatives to hedge against losses.

The study tested these strategies by modeling their performance during market crashes. The results showed that diversifying into other assets was the most effective way to protect a portfolio from drawdowns. However, this approach requires giving up some of the potential gains of holding Bitcoin.