Best News Network

Bitcoin’s rising correlation with tech weighs on hedge appeal

A familiar tune played out in the market Friday: technology stocks staged a mini rebound and at almost exactly the same time, Bitcoin reversed course too, spotlighting the cryptocurrency’s tendency to move in lockstep with other risk assets.

The world’s largest digital token was up 0.6% to $43,080 on Friday as of 3:46 p.m. New York-time. Seasoned market veterans might not have been surprised to see that the Nasdaq, which is heavily-weighted toward big tech companies, also advanced.

“Bitcoin is following the usual near-term pattern, which is a relatively high correlation with Nasdaq and other technology stocks,” according to Matthew Sigel, head of digital assets research at VanEck.



Practically all week, cryptocurrencies have twisted and turned in the same way technology stocks have, with both sets of assets coming under pressure as the Federal Reserve becomes more hawkish with its policy.

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 own high-beta risk assets.”

b1Bloomberg

The 100-day correlation coefficient of the coin and the Nasdaq 100 now stands at 0.40, among the highest such readings going back to 2011. (A coefficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.)

“People are stepping back and saying, OK, what is Bitcoin?,” Victoria Greene, founding partner and chief investment officer at G Squared Private Wealth, said by phone. “Bitcoin is showing a lot more tendency to track with and correlate with the Nasdaq and the market than it is with inflation and uncorrelated currency.”

For most of its 13-year history, Bitcoin has enjoyed an environment of easy monetary policy and zero or negative rates. But both stocks and cryptocurrencies have been volatile as of late as the Fed prepares to withdraw pandemic-era stimulus that had been in place for the past two years. While there is no straight through-line from the Fed’s coffers to Bitcoin buy-orders on exchanges, there is a connection, according to analysts who say that less money in the system means fewer dollars going toward crypto, too.

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

Stay connected with us on social media platform for instant update click here to join our  Twitter, & Facebook

We are now on Telegram. Click here to join our channel (@TechiUpdate) and stay updated with the latest Technology headlines.

For all the latest Business News Click Here 

 For the latest news and updates, follow us on Google News

Read original article here

Denial of responsibility! NewsAzi is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.