October 2, 2022

Bitcoin’s High Volatility Can Impact The United States Stock Market: DBS Research

2 min read

Bitcoin is no longer considered a specific niche property as its high price changes impact the stock markets, concluded researchers from Singapore’s DBS Group Holdings Ltd. In a recent paper, they laid out the increased correlation in between the 2 markets since BTC started to value in value in late 2020.

Bitcoin Is No Longer a Fringe Asset

The primary cryptocurrency went through a considerably bullish period from the start of October 2020 to mid-April, in which its worth increased by more than six-fold to $65,000. Regardless of its most recent turbulence, the asset caught the attention of stars, institutions, prominent investors, and more.

DBS’s Macro Strategist Chang Wei Lian and Chief Economist Taimur Baig outlined this development in their newest paper.

“The upshot is that Bitcoin is no longer the fringe possession that it once was.”

BTC’s rise can likewise impact other markets. The experts wrote that since the main cryptocurrency started to get traction last year, the connection with stocks increased.

“Our finding is that Bitcoin is positively correlated with S&P 500 futures (hence functioning as a risky asset), and this is the case for each month given that Nov 2020.”

Although it’s still reasonably low, the correlation can still “create spillovers into United States equities,” specifically when BTC’s rate goes through huge price variations.

DBS’s researchers breached a number of trading days in which bitcoin increased or down by more than 10% in a matter of hours. Each was followed by boosted market relocations for the S&P 500 in the very same instructions.

“This recommends that broader equity belief might end up being more combined with belief in Bitcoin markets for a short-lived time period.”

YTD Returns; BTC vs. S&P 500

With the increasing connection between BTC and S&P 500, it’s likewise worth examining their returns because the start of the year. Although both are well in the green, one has significantly surpassed the other, even though it’s 40% away from the mid-April peak.

Various Assets Performance. Source: Skew
Various Assets Performance. Source: Skew As the graph above shows, the prominent United States index, following the efficiency of the 500 largest companies listed on American exchanges, is up by 11% because the start of 2021. In the same period, however, bitcoin has marked an ROI of almost 40%.

Interestingly, the second-largest cryptocurrency has actually outperformed both, with a massive boost of over 280% since the start of the year.