Long-Term Correlation Between Bitcoin and Wall Street Dimmed…Details Here
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Answer Long-Term Correlation Between Bitcoin and Wall Street Dimmed…Details Here
Before the pandemic, Bitcoin distinguished itself as an inflationary hedge due to its low correlation (near zero) with traditional assets such as stocks.
But recently, this narrative has taken a 180-degree turn, owing to shifts in the macroeconomy.
According to report Released by 21Shares, Bitcoin and the S&P 500 moved synchronously, and their correlation rose to an all-time high of 0.69.
This has led to uncertainty about crypto assets and they are not diversifying the portfolio properly.
Bitcoin’s long-term declining correlation with the S&P 500:
21Shares explains that the pairing of cryptocurrencies with traditional assets is just a short-term event.
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In its sixth edition of its “Crypto Country” report, the company noted that the two asset classes are moving along distinct long-term paths.
Additionally, the report showed that at 0.07, there is virtually no correlation between Bitcoin and gold.
With this in mind, 21Shares concluded that these two assets offer unique diversification resources to investors’ portfolios.
As for the returns, many crypto investors focus on the timing of their investments, looking for an appropriate period in which the returns will be higher.
Cryptocurrency investments have been affected by events such as the collapse of the Terra ecosystem, the interest rate hike from the Federal Reserve, and the recent discontinuation of the Solana blockchain, among many others.
The influence of market conditions prevailing among institutional investors was also noted.
Just last month, many institutional investors withdrew their funds from crypto products, causing the assets under management (AUM) to decline in 10 months.
Differently, the report concluded that timing, in most cases, is not an important factor when making crypto investments.
In 90% of cases, Bitcoin outperforms itself within a year regardless of when you invest in it.
Read:Thailand: Arrest of a gang defrauding $ 16 million in the name of investing in cryptocurrency
Digital asset price movements were better when investing for three years in 100% of the cases.
For this reason, the company noted that adding crypto assets to an individual’s investment portfolio increases risk-adjusted returns.
In addition, better returns can be seen in large cryptocurrency wallets compared to only Bitcoin wallets.
Read also:
New Terra project fails to make up for former coin holders’ losses
Dubai grants temporary approval to “CryptoCom” to provide crypto services
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