This year is shaping up to be better and better for Bitcoin in a number of ways. Since the beginning of January, the cryptocurrency exchange rate has strengthened by 80 percent, while the broad American stock index S&P 500 has increased by fifteen percent. Perhaps even more important than the current price: in the second quarter of this year, the correlation between the price of the cryptocurrency and US stocks continued to decline. It is at such a negligible level as at the end of 2019. The cryptocurrency behaves like an investment on its own, which revives thoughts about whether Bitcoin can be taken as a digital analogue of gold.
Now Larry Fink, the head of the world’s largest asset manager, BlackRock, has joined the debate. “People can take Bitcoin as an alternative to investing in gold as insurance against inflation and deep problems of one country or against the devaluation of a specific currency. Bitcoin is an international asset,” he said Fink for Fox Business. His company wants to launch an exchange-traded fund (ETF) in the US with bitcoins as an underlying asset.
In the case of cryptocurrencies, however, it is generally true that it pays to work with a longer-term horizon. The current and long-term degree of correlation of various types of investments is shown in infographic E15.
What to watch out for when investing in cryptocurrencies. Watch Video: Five Ways to Lose Everything on Cryptocurrencies • VIDEO Videohub
But in the second quarter of last year, the correlation between the development of the price of Bitcoin and the Nasdaq index of technology stocks reached the highest level for the entire monitored five-year period. The correlation rate rose to 0.63. From the level of 0.7, we can already statistically speak of a very strong connection.
Bitcoin popularizer Josef Tětek, author of the book “Bitcoin: The Separation of Money from the State”, shares similar thoughts on Twitter he glossed, that while in the short term bitcoin is volatile, in the long term it serves as a store of value. The opposite is said to be the case with standard money.
Bitcoin’s relatively recent bounce in the stock beat at a time of extraordinarily high inflation in advanced economies has been linked to concerns about the effects of rising rates and quantitative tightening in the United States. As expected, this had a negative impact mainly on growth stocks, or rather stimulated another rush from riskier types of investments, where cryptocurrencies cannot be excluded due to volatility.
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2023-07-09 06:32:25
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