Are Crypto Markets Correlated to Stock Markets?
Is there any trading or sentimental link between crypto and stock markets? The latter has been falling at a substantial pace over the past two months – the crash in stock markets is supported by a lower than expected performance from tech and industrial stocks.
Uncertainty related to plummeting oil prices and Trump’s trade war with many big economies have been contributing to the selloff.
Source: marketwatch.com
US stock markets have lost all the gains that they had generated early this year. The S&P and Dow continue to trade in negative territory year to date, while the Nasdaq is up only 1% despite a sharp rally at the beginning of the year.
Is the Bearish Trend in Stock Markets Aiding the Crypto Market Selloff?
Crypto markets have different market dynamics than stock markets. Crypto coins generally move on market speculations and sentiments; the SEC’s role and traders’ sentiments towards new legislation and infrastructural improvement in blockchain technologies historically played a key role in deviating prices.
Crypto markets were stable and steady since the beginning of September to mid-October; the overall market cap was around $210 billion during the past two months. Traders were expecting the market to rally. This is because Bloomberg and several other reports indicated that institutional investors are finally buying crypto coins.
Jeremy Allaire, the chief executive officer of Boston-based Circle Internet Financial had said, “We’ve seen triple-digit growth enrolling in our OTC business. That’s a big growth area.”
Bobby Cho, global head of trading at Cumberland believe improving trading environment in cryptocurrency exchanges are adding to institutional investor’s confidence. “What that’s showing you is the professionalization that’s happening across the board in this space,” Cho said. “The Wild West days of crypto are really turning the corner.”
The surprise crash in crypto markets is associated with controversy related to Bitcoin Cash’s hard fork. The SEC’s announcement of a crackdown on crypto exchanges and illegal activates had also impacted trading volumes.
Bitcoin is trading around the $4,300 level after the latest selloff while the total crypto market plunged to $137 billion for the first time since last October.
There is No Correlation between both Markets
The level of correlation between stock and crypto markets appears minimal. This is because both markets have different trading environments and business prospects. It’s not more than a coincidence that both markets are plummeting at the same time for different reasons.
Do you see any correlation between stock and crypto markets? Let us know about your opinion in the comment section below.