Correlation Between Stocks and Crypto Markets Likely to Decline Over Time
The relationship between equities and the crypto market is expected to weaken in the future as the digital asset space matures, according to a research report from Wall Street bank Citi (C) released on Monday.
While stocks have historically been the primary macroeconomic driver for cryptocurrencies, this correlation is likely to diminish over time. The report attributes this shift to several factors, including a growing and diversified investor base, advancements in blockchain technology, and increasing adoption of digital assets.
Despite this trend, Citi notes that the speculative nature of cryptocurrency markets means that correlations with risk assets could remain elevated, particularly during periods of market stress.
Additionally, analysts led by Alex Saunders suggest that the emergence of a clearer regulatory framework in the U.S. will contribute to more independent price movements within the crypto sector.
Looking ahead, Bitcoin’s (BTC) volatility is expected to decline in the long run as institutional adoption continues to rise. Citi also highlighted that cryptocurrency was the only asset class to increase its market cap relative to U.S. equities last year.
Moreover, Bitcoin’s growing correlation with gold is worth monitoring, as it could serve as an early indicator of its potential as a “store of value,” the report added.
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