Bitcoin’s growing correlation with technology weighs on hedging appeal

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(Bloomberg) – A familiar tune played out in the market on Friday: Tech stocks made a mini rebound and almost exactly at the same time, Bitcoin also reversed course, highlighting the cryptocurrency’s tendency to move at the same time. pace than other risky assets.

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The world’s largest digital token was up 0.6% on Friday at 10:57 a.m. KST. Seasoned market veterans may not have been surprised to see that the Nasdaq, which has a strong focus on large tech companies, has also risen.

“Bitcoin follows the usual short-term pattern, which is a relatively high correlation with the Nasdaq and other tech stocks,” said Matthew Sigel, head of digital asset research at VanEck.

Most of the week, cryptocurrencies have twisted and transformed in the same way as tech stocks, with both sets of assets coming under pressure as the Federal Reserve becomes more hawkish with its policies.

Marko Papic, chief strategist at Clocktower Group, agrees. Bitcoin “is a high beta risk asset,” he said, adding that “in an environment where the Fed is becoming more hawkish, you don’t really want to hold high beta risk assets.”

The 100-day correlation coefficient for the coin and the Nasdaq 100 now stands at 0.40, among the highest such readings since 2011. (A coefficient of 1 means assets are moving at the same rate, while that minus-1 would show that they are moving in opposite directions.)

“People take a step back and say, okay, what is Bitcoin?” Said Victoria Greene, founding partner and chief investment officer at G Squared Private Wealth by phone. “Bitcoin shows a much more tendency to track and correlate with the Nasdaq and the market than with inflation and the uncorrelated currency.”

The story continues

For most of its 13-year history, Bitcoin has benefited from an easy monetary policy environment and zero or negative rates. But stocks and cryptocurrencies have been volatile lately as the Fed prepares to withdraw pandemic-era stimulus that had been in place for two years. While there is no direct line between Fed coffers and Bitcoin buy orders on the exchanges, there is a link, analysts say, who say less money in the system also means. less dollars for crypto.

Read more: Crypto Diehards set to find out if it really was a bubble

“If this continues in terms of correlation, we think crypto might lose its appeal as a hedge and we’re starting to see it right now,” said Anderson Lafontant, senior adviser in advanced planning at Miracle Mile Advisors.

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