Correlation or Coincidence? Crypto Is Falling In Tandem With US Equities

Correlations with US Equities higher during falling market
Correlations with physical gold are relatively insignificant
World has seen mostly asset price inflation throughout crypto's history
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day

CRYPTO MOVERS AND PRICES

 

 

CRYPTO STORY OF THE DAY

Crypto Is Falling In Tandem With US Equities - Correlations, While Still Inconsistent, Tend To Be Higher With US Equities Over Other Major Asset Groups, Particularly In Downdrafts.

We highlighted that while bitcoin (BTC) is often described as digital gold, at this point correlations with physical gold are relatively insignificant. On Monday, US equity futures were down over 3% on what has widely been described as a reaction to coronavirus spreading within southern Europe. Most of the Top 10 cryptos were down over 5% and the sell-off has continued this morning.

Crypto Takeaway: Due to the volatility of crypto, looking at simple daily correlations versus any asset class tend to hold little value. Furthermore, the World has seen mostly asset price inflation throughout crypto's history, while the asset class has grown from nothing to a multi-100-billion-dollar industry, so even longer-term correlations are almost exclusively positive. Some of the most significant drawdowns in crypto over the last few years, however, have coincided with US equity pullbacks. Notably, in September to November 2018 BTC fell by nearly 50% while the SPX was having its worst 3-month period in the last 5-years. The 2017 'crypto bubble' also burst while the SPX was witnessing its worst pullback in 2-years at the time in late January 2018. While imperfect, the global barometer of speculative trading that is the US equity market seems to show as much correlation with crypto then do other major benchmarks.

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