Since the outbreak of war with Iran on February 28, bitcoin has started to move away from software stocks, with the iShares Expanded Tech-Software Sector ETF (IGV) serving as a useful indicator for the sector.
Bitcoin has been one of the best performing assets during this period, rising over 5% and trading above $69,000 again, including a gain of over 0.5% in the last 24 hours.
The IGV, on the other hand, has fallen by more than 2% since the start of the conflict. This gap suggests that investors are starting to treat Bitcoin stocks and software differently, at least in the short term.
Until recently, the two men lived closely together. Over the past three months, bitcoin has fallen 26% and the ETF has fallen 23%. Year to date, both numbers are down about 21%. Over five years, bitcoin has gained 18% compared to 10% for IGV. In other words, both moved in the same direction, but the cryptocurrency did so with much greater volatility.
This is also seen in their decline. Bitcoin is down about 50% from its all-time high in October, while IGV, which peaked a little earlier, is down about 35% from its own high.
Correlation data tells the same story. Since the beginning of February, Bitcoin and IGV were almost perfectly correlated, close to 1.0, meaning they were moving at almost the same rate. After the start of the war, this relationship broke down sharply, with the correlation falling to 0.13, a level that signals near decoupling, before rebounding to around 0.7. The number can vary between -1.0 and +1.0, with 0 indicating no correlation.
Why were software stocks hit harder?
IGV is heavily skewed toward large software and services companies such as Microsoft (MSFT), Oracle (ORCL), and Salesforce (CRM). Investors are increasingly concerned that artificial intelligence will squeeze software margins and valuation multiples, particularly in software as a service (SaaS), as competition increases and barriers to entry fall. Bitcoin, meanwhile, trades more as a macro asset, benefiting from geopolitical uncertainty.
