Long-Term Correlation Between Bitcoin and Wall Street Waned as BTC Has Better Returns (Report)

Bitcoin was popularized as an inflationary hedge before the pandemic because of its low correlation (near zero), with stocks and other traditional assets.

Recent macroeconomic shifts have caused the narrative to take a 180deg twist. 21Shares reported that Bitcoin and the S&P 500 moved in tandem, with their correlation reaching an all-time high at 0.69. This created uncertainty about the utility of crypto assets for portfolio diversification.

The Bitcoin Correlation to S&P500 Lower Long-term

21Shares does not dispute the fact that crypto and traditional assets are being merged, but 21Shares shows this is a temporary phenomenon. The company highlighted in its sixth issue, “State of Crypto”, that both asset classes follow different paths over the long-term.

The report also showed that there is almost zero correlation between Bitcoins and gold at 0.07. 21Shares concluded from this report that both assets offer “unique diversification opportunities for investors’ portfolios.”

Many crypto players are focused on the timing of their investments and seeking out periods when they will see the highest returns. Events such as the collapse of Terra, Fed interest rate increases, and the recent Solana halt have had an impact on crypto investments.

Institutional investors have also seen the effects of market conditions. Many institutional investors withdrew funds from crypto investments products last month, leading to a 10-month low of assets under management (AUM).

The report found that timing is insignificant when investing in crypto. Bitcoin outperformed other investments within one year in 90% of cases regardless of the time it was invested. In 100% of cases, the price movements of digital assets were better when they were held for three years.

According to the firm, crypto assets can increase risk-adjusted return by adding them to an investment portfolio.

Crypto Adoption is on the Rise

Eliezer Ndinga is 21Shares’ director of research. He said that many institutions and companies have reached similar conclusions and “recognize how strong the asset class performs over time despite ups or downs.”

Notably, several large institutions such as Bank of America (BoA) have changed from a hostile attitude towards cryptocurrency to be more accommodating. Even though the bank stated that it does not intend to offer crypto services at this time, it admitted that Bitcoin and cryptocurrency are too important to ignore.

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Marla Brooks

Marla Brooks – Financial Analysis My name is Marla Brooks, and I am the mainstream behind the”observednews.com”  for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.

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