Are Crypto and Traditional Markets Linked?

Crypto is characterized as operating outside of traditional financial system
Bitcoin remains relatively correlated in S&P 500 market sell-offs
Crypto remains highly dependent on fiat on/off ramps
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day





Crypto Volumes Are Quiet With Summer Doldrums Well Known To Traditional Finance Seemingly Also Impacting The Asset Class - The Muted Activity Serves As A Reminder That, In Spite Of Their Dissimilarities, The Incumbent Financial System And Crypto Remain In Many Ways Linked

Over the past month activity across major crypto trading venues has dwindled. For example, Bitfinex saw averages of USD equivalent +300M of daily volume in early July, where the 30-day average is now below $200M/day. Similarly, notional activity on BitMEX has reverted to being about in line with the 365-day average which was primarily composed of periods with much lower crypto prices.

Crypto Takeaway: While crypto is often characterized as operating outside of the incumbent financial system, the reality is that in this nascent stage it remains highly dependent on fiat on/off ramps. The result is that one can anecdotally observe characteristics in the space long exhibited in traditional finance. For example, despite being a 24/7 market, without any major events, crypto trading is generally quieter on the weekend, the same can be said for major banking holidays, etc... The observation ties into discussions last week which highlighted that crypto remain relatively correlated in market sell-offs. One could imagine that when / if crypto reaches critical mass and stops exhibiting these anecdotal similarities to traditional finance, the sector might then be isolated enough to 'trade on its own in periods of traditional market stress.

About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets.