Crypto correlation with stock market.
In our previous material, we figured out whether there is a correlation between Bitcoin and other coins. There is a direct correlation between almost all digital assets. Perhaps excluding stablecoins and several altcoins.
Somewhere – to a greater extent, somewhere – to a lesser extent. But what is the relationship between the digital asset market and the traditional market? Does this help predict the dynamics of the movement of coins? Let’s get it right.
Once upon a time in a distant galaxy of cryptocurrencies.
One of the benefits of creating Bitcoin 11 years ago could be the lack of correlation with other asset classes. But a decade has passed, and we can say for sure whether this is actually so or not.
A few years ago, crypto assets didn’t actually correlate with traditional assets (stocks, commodities, currencies in the circulation of countries). But now the situation is different.
The question for many investors may be the following. Is it possible to hedge the risks associated with the traditional market using cryptocurrencies?
Voices of Crypto Analysts.
Based on last year’s data from reputable publications, we’ll try to discover the connection of Bitcoin with other markets. JPMorgan analysts conducted a detailed analysis, during which it turned out that over the past five years, the correlation of Bitcoin with the S&P 500 index, US government bonds and gold has been at zero level.
Studies have shown that the volatility of digital assets is significantly higher than that of stocks (which, incidentally, was already understandable). Experts concluded that “it is not known how the coins will behave during financial turmoil, but they can be used to diversify due to the low correlation with stocks and bonds.”
However, this is not the only opinion. For example, analysts at Bitwise Asset Management, on the contrary, believe that the correlation between the two markets is only growing from year to year. They found that the correlation of Bitcoin with stocks and bonds is 0.12 and 0.25, respectively (as you remember, the ideal case is +1). For comparison, we can cite their data on the correlation of US and global stocks. Here the indicator is 0.88.
Sifr Data found a negative correlation between Bitcoin and the S&P 500 index (-0.27). This tells us about their weak correlation. For gold, the indicator is even lower (-0.1 – both types of assets are neutral to each other). By the way, experts consider their information closer to reality. We told you about this when we analyzed the correlation table of digital currencies.
S&P 500 & Bitcoin.
Blockforce Capital, an American asset management company, also revealed a slight correlation between Bitcoin and Standard & Poor’s 500.
Crypto correlation with
In the case of traditional markets – economic growth, interest rates, corporate profits. And for cryptocurrencies, legislative changes and investor confidence are important.
However, digital assets continue and, most likely, will continue to be popular with investors.
Due to the low correlation with traditional markets, during economic and financial shocks, investors invest a certain part of funds in this sphere, since such a maneuver often saves investors from huge losses.
Some experts believe that the cryptocurrency industry will undergo major changes in the future. Tim Enneking, managing director of Digital Capital Management, claims that after institutional investors enter the digital currency market, they will become more like securities.
This article is not a recommendation for investment or investment in cryptocurrencies, as well as perceived as investment advice. Be careful, because investing in cryptocurrencies is very risky and you need to consult with your financial advisor. Past earnings do not guarantee future earnings.
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