Trading the world’s first cryptocurrency and transactions within traditional equity markets appear to be going hand-in-glove.
The correlation has become more pronounced, prompting many global financial bodies to offer solutions and set rules to regulate the intersection of two similar but different economic worlds. cryptocurrencies have moved from parties to mainstream, increasing the likelihood of indirect impact on investors' sentiment on other asset classes, especially equity.
Cryptocurrencies' link to stocks rose even higher between stocks and assets such as bonds and gold, according to an IMF report in 2022. From a simple economic point of view, supply and demand are the main drivers behind the prices of products and services, not least the value of equities. Bitcoin trading also adheres to the same principle due to the steady supply of 21 million of them.
According to the IMF, crypto and financial markets in Asia were worlds apart prior to the pandemic. Over the past year or so, the lines between the two have become blurry and additional regulatory measures seem to be necessary. For example, the correlation between Bitcoin and the Indian stock markets has grown 10-fold in the wake of the pandemic.
Another interesting feeling in the market is that most investors equate bitcoin or encryption with technology stocks due to the rapid rise in the adoption of basic blockchain technology. The belief from an investment point of view is that blockchain provides a benefit, in contrast to Bitcoin and its traditional counterpart of gold, which does not
Another interesting market sentiment is that most investors are equating Bitcoin or crypto to tech stocks due to the rapidly rising adoption of the underlying blockchain technology.
The next two years will see cryptocurrencies enjoy their own lives, with unique identity and market attributes, not just simulating stocks and technology stocks. However, equity and crypto alignment is not that bad because it offers traditional investors a new way to diversify their portfolios.
