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Jan 27, 2022

Bitcoin increasingly tracking traditional assets, including US tech stocks, finds study

Goldman Sachs research shows world’s most popular cryptocurrency mirroring market fluctuations

The relationship between Bitcoin and traditional markets has grown closer since 2020, according to research from Goldman Sachs.

It notes that the cryptocurrency is increasingly tracking the movements of key assets that in turn have influence on the global markets, according to the Financial Times. This is happening at a time when institutional investors and other Wall Street players are increasingly entering the world of digital finance.

Correlations with US tech stocks, crude oil and government bonds have all risen significantly since 2020, finds the research, though movements in Bitcoin – notorious for its volatility – tend to be much sharper than those seen in traditional assets.

Even if the swings are bigger, researchers say investors and analysts are paying more attention to the increasing closeness between the two asset classes. Already during 2022, Bitcoin has ‘moved in near lock-step’ with Nasdaq 100 futures, described by the FT as ‘derivatives that are considered a proxy for sentiment toward America’s tech giants’.

‘Prior to the pandemic, Bitcoin and other digital assets showed low correlations to traditional financial market variables – in effect, crypto behaved as an entirely different ecosystem,’ the paper quotes Zach Pandl, co-head of foreign exchange strategy at Goldman Sachs, as saying.

‘But over the last two years, as Bitcoin has seen wider mainstream adoption, its correlation with macro assets has picked up.’

Backing up the findings is a note from boutique research house Fundstrat, which told clients earlier this week that ‘cryptoassets continue to exhibit a strong correlation with equities’. The Nasdaq 100 index of the biggest companies listed on Wall Street’s tech-focused Nasdaq Composite has tumbled about 11 percent this year, reports the FT, while Bitcoin is off 18 percent.

‘Meanwhile, a basket of unprofitable tech stocks, which like Bitcoin are considered to be speculative investments, has fallen 23 percent,’ says the FT.

Garnet Roach

Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of subjects, from technology to...

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