Bitcoin is showing signs of less stock market correlation
Bitcoin’s correlation to the stock market may finally disintegrate as 2022 draws to a close. The leading cryptocurrency has experienced less volatility these days compared to the swings of the stock market.
For most of the year, bitcoin has had to battle the same downward pressure that has affected both the stock and bond markets. As central banks around the world look to tighten monetary policy to keep inflation in check, it has produced a heavy dose of downside volatility that is keeping investors on the sidelines when it comes to traditional assets.
The same pressure has also affected bitcoin, which is ideally an uncorrelated asset when juxtaposed with the traditional financial markets. However, as markets appear to be trying to recover in the fourth quarter, bitcoin has remained relatively quiet in comparison.
“Crypto markets continue their lull with little progress anyway,” said Richard Usher, head of OTC trading at BCB Group. “Until broad risk bounces, this sector will not.”
Heading into the last quarter, bitcoin pushed above the $20,000 level amid a rally, but has fallen below and back above the $19,000 price level of late. As the stock market has rallied, the leading cryptocurrency has re-established its non-correlation to stocks.
“The price of bitcoin maintains the $19,000 level, but with FOMC minutes and CPI ahead this week, the market is likely to refrain from taking risks, which in turn is likely to put pressure on bitcoin,” said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitban.
More institutional adoption
Prospective bitcoin investors looking for a sign of bullishness may look to more institutional adoption as traditional market players look to add more digital currencies amid the 2022 decline. It may be an opportune time for these large investors to pour large doses of capital into cryptocurrencies while prices are still depressed.
“These large companies believe in the potential of digital assets and Web3,” said Owen Lau, an analyst at Oppenheimer. “It takes time to build, but these companies have a long-term view of building their capabilities to ensure they won’t be behind in 3-5 years.”
The latest price declines in 2022 may bring more skeptics to bitcoin investments. However, there is an alternative solution via bitcoin futures.
Investors looking to gain bitcoin exposure while avoiding investing via a cryptocurrency exchange can choose ProShares Bitcoin ETF (BITO). The fund provides exposure to bitcoin futures, tracking the price movements of the leading cryptocurrency on a normal market exchange.
Furthermore, the fund is actively managed, giving investors peace of mind knowing that their investment is in the hands of experienced portfolio managers. Bitcoin can be a volatile asset, and active management can make portfolio changes on the fly when market conditions warrant an adjustment.
BITO has also stayed in lockstep with bitcoin prices, so investors don’t have to worry about whether the fund will deviate from the cryptocurrency’s price movements. BITO provides this tactical exposure while staying within the regulatory framework of the traditional financial market, increasing potential security.
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