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Is Institutional Money the Reason for Bitcoin’s Recent Correlation to Stocks?

by Sonal Shukla

Bitcoin has been the mainstay for a plethora of investors prowling on digital platforms. This is due to the fact that this cryptocurrency is highly opportunistic with promising returns. Visit the official website Despite the lingering possibilities of high volatility & unpredictability, Bitcoin has witnessed a great influx of investors, traders, and other participants.

The latest development in cryptocurrency has helped millions of people to successfully engage in transactions with greater efficiency. Many developers have also postulated that bitcoin falls in the category of uncorrelated assets, which is proved to be true to the most extent. Cryptocurrency has become the lender of last resort for many countries now, and the trend continues. Here’s what Bitcoin Era has to say on the matter:

Bitcoin might just be the leeway that struggling countries can capitalize on 

The leading cryptocurrency behaves quite similarly to the other commodity exposures. However, Bitcoin has also been witnessed to be making strides in the stock market that operate on broad scale. It is quite obvious also as the leading cryptocurrency has been subject to thousands of allegations even since it came into existence. There have been innumerable proponents & opponents of cryptocurrency in the last decade, and the ride has been no less than a rollercoaster for Bitcoin. Many analysts operating in the digital domains have affirmed that the leading cryptocurrency is on its way to making exclusive advancements in the years to come. 

Challenges that may come in disguise of lucrative opportunities 

The global market that we know today is exposed to a pool of challenges, and new challenges pop up out of nowhere. A very recent example of such a challenge came in the form of the Russia & Ukraine war that debilitated the crypto market quite intensely. However, the recovery from the major blow was equally aggressive, and things went back to normal in the crypto industry. But the threats are always lurking in the shadows of digital space, and rising inflation is one such stigma that users will have to face owing to the unabated war. 

The hikes in rates have also been witnessed recently, which undermines the ability of nascent traders to remain afloat in the market. If this was not enough, then geopolitical tensions are yet another form of challenge that the crypto industry has to come to grips with. 

Stock & crypto correlation might be the center of debate for the next few weeks 

The major indexes in the stock market are still susceptible to massive fluctuations, and there is no certainty in the market, which makes it all a risky proposition. But the majority of the recent fluctuations can be attributed to the war that Russia triggered, which led to massive sanctions on the Russian economy also. The bottom line is that no one is immune to the challenges that come in abundance and the increasing reliance on the crypto industry also seems to be a major concern. 

One might wonder, what kind of concern will cryptocurrency be subjected to? Well, whenever there is more demand for something, the prices always go high. Also, Bitcoin cannot be produced indefinitely as it has to be developed in limited numbers. But, the demand seems to rise consistently, which is a major concern as it will eventually lead to a rise in prices which is quite inevitable at this stage. 

The geopolitical situation that might escalate further

The existing correlation between stocks & crypto has gone significantly higher as far as the last few months are concerned. The geopolitical situation is in a constant frenzy of the Russia-Ukraine war, and the future seems quite uncertain as far as the Ukrainian economy is concerned. If we talk about the pertinent statistics, then the leading cryptocurrency, Bitcoin, is already down to 21% in the financial year 2022 alone.

Keeping the recent developments in the crypto industry in mind, investors are growing skeptical about joining the crypto industry. The turbulent nature of the industry has deterred many investors. They rather tend to take a back seat until the situation comes back to normal. Adding more digital assets to the portfolio may be one sound way to remain active on the digital platforms. 

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