Bitcoin never sleeps. Stock exchanges do. That basic mismatch between a 24/7 cryptocurrency and geographically scattered equity markets that open and close on their own schedules creates a puzzle: when traditional markets are dark, whose information is Bitcoin actually reacting to?
A new paper published in Applied Economics Letters takes on that question by matching hourly Bitcoin price movements against the returns of a dozen major stock indices around the world. The authors find that global equity markets do move Bitcoin, that the effect is often larger when those markets are closed than when they are open, and that North American indices, especially those of the United States and Canada, tend to dominate.
The question behind the numbers
Earlier research has established that Bitcoin is linked to a range of financial variables, from interest rates and currencies to gold and oil, and has debated whether it behaves like a hedge, a diversifier, or a safe haven relative to stocks. But most of that work uses daily data, which blurs a structural feature of the crypto market: its trading day has no bookends.
Haofei Zhang of Ningbo University of Technology, along with Jin Peng of the University of Colorado, Colorado Springs, Yun Ma of Wenzhou-Kean University, and Kose John of New York University’s Stern School of Business, set out to exploit that structural difference. Because Bitcoin trades continuously, they could split each stock index’s daily return into two pieces, the intraday move that happens while that market is open, and the overnight move that shows up between yesterday’s close and today’s open, and ask which piece has more sway over Bitcoin.
A quick vocabulary note is useful here. Following earlier work by Baur and Lucey, the authors treat an asset as a “hedge” for another when their returns move in opposite directions on average, and as a “diversifier” when they move in the same direction but only imperfectly. That framing shapes how the results are interpreted.
How the study was built
The team pulled hourly Bitcoin prices in U.S. dollars from April 2013 through January 2023, sourced from FirstRateData. They paired that series with daily data from Yahoo Finance for 12 major stock indices spanning North America, Europe, Asia, and South America, including the S&P 500 (United States), TSX (Canada), IPC (Mexico), IBOVESPA (Brazil), DAX (Germany), FTSE 100 (United Kingdom), IBEX 35 (Spain), SMI (Switzerland), Nikkei 225 (Japan), KOSPI (South Korea), NIFTY 50 (India), and SHSZ 300 (China).
For each index, they computed three return series: the full daily return, the intraday trading-hour return (from that day’s open to that day’s close), and the overnight non-trading-hour return (from the previous close to the next open). They then ran regressions relating each of those returns to Bitcoin’s return over the corresponding window, controlling for Bitcoin’s own lagged return and for movements in gold and oil prices. The statistical adjustments they used address the tendency of financial return data to have volatile and autocorrelated errors, which can otherwise inflate apparent significance.
What the analysis showed
Across most of the 12 countries, stock index returns were positively linked to Bitcoin returns. When a country’s market went up, Bitcoin tended to go up with it. The size of that link, however, varied significantly by country and by whether the equity market was open or closed.
The coefficients tell an economically meaningful story. A reading of roughly 0.30, for example, means that a 1% move in a stock index was associated with about a 0.30% move in Bitcoin in the same direction. Given Bitcoin’s high volatility, that is not a trivial connection.
Two patterns stood out. First, the U.S. and Canadian indices had the largest and most consistent effects on Bitcoin returns overall, and their effects were especially pronounced during their own trading hours. Second, when the authors looked at overnight windows, when North American markets were closed, Mexico, Canada, and the United States again showed the strongest links, suggesting that news and positioning from that region continued to filter into Bitcoin prices even after the closing bell.
Japan was the notable exception to the general pattern. The Nikkei 225’s returns showed a negative relationship with Bitcoin returns in some specifications. Using the Baur-Lucey framework, the authors interpret this as evidence that the Japanese market can function as a hedge against Bitcoin, while the North American markets act more like diversifiers, offering only partial protection because they tend to move in the same direction as Bitcoin.
Zooming in by region
The researchers then narrowed the lens to see which market within a given region carried the most weight. Inside North America, the Canadian TSX consistently had the largest influence on Bitcoin returns, though the U.S. S&P 500 was more dominant during its trading hours and Canada took over during non-trading hours. Mexico’s IPC played a supporting role, particularly in overnight windows.
Within Europe, the U.K.’s FTSE 100 stood out as the most influential index for Bitcoin’s daily returns. During European trading hours, however, Switzerland’s SMI became the strongest single influence, while Germany’s DAX had the largest effect during European overnight windows.
In a broader regression that included all 12 indices at once and split Bitcoin returns by the time zone in which they occurred, Canada’s index emerged as a positive driver of Bitcoin returns in the North American, European, Indian, and Brazilian time windows. The U.K. index was the strongest positive influence during Chinese and Indian trading windows. The authors read these patterns as evidence that North American markets, together with the U.K., play an outsized role in shaping how global information gets absorbed into Bitcoin’s price.
What it might mean for investors
The findings carry a few practical implications. Because stock returns and Bitcoin returns tend to move together, especially with North American indices, Bitcoin’s usefulness as a portfolio diversifier is limited precisely when equity markets are moving in unison. The authors note that this constraint appears stronger during non-trading hours, suggesting that hoping Bitcoin will zig while stocks zag is not a safe bet on average.
At the same time, the country-by-country heterogeneity leaves room for more targeted strategies. The negative relationship the authors document with the Japanese market points to Bitcoin as a possible hedge against Nikkei exposure, and specific pairings of markets and time windows may still offer diversification benefits that a blanket “Bitcoin versus stocks” view would miss.
Several caveats are worth keeping in mind. The study is observational, so the associations it documents do not, on their own, prove that stock movements cause Bitcoin movements. The sample runs through January 2023, before the most recent phase of institutional adoption and spot exchange-traded-fund activity. And the authors themselves note that their analysis is limited to hourly data and to Bitcoin alone, leaving open questions about whether higher-frequency data or other cryptocurrencies would tell a similar story.
