The U.S. stock market closed lower, with cryptocurrency-focused stocks experiencing a slight dip of less than 0.5%. Bitcoin(BTC) and Ethereum (ETH) remained relatively stable over the past 24 hours. Traders have noted that major cryptocurrencies are beginning to show signs of correlation with the U.S. stock market.
This observation is further supported by a recent study from Georgetown University, which highlighted an increasing correlation between the price of cryptocurrencies and the stock market, especially during periods of high market volatility.
Bitcoin’s price faced pressure on Tuesday, trading at $26,200. The broader financial market seems to be anticipating a prolonged period of increased interest rates.
This anticipation appears to be driven by concerns over inflation, which could impact higher-risk assets. Alex Kuptsikevich, a senior market analyst at FxPro, mentioned in a report to CoinDesk that the positive correlation between cryptocurrencies and the stock market seems to be back on track. Despite the stock market’s turbulent phase, the cryptocurrency market remained subdued, with a mere 0.3% decline in 24 hours, settling at $1.045 trillion.
However, the crypto fear and greed index is venturing into the ‘fear’ zone. This index operates on the premise that fear can lead to a decline in stock prices, while greed can drive them up. The CoinDesk Market Index (CMI), which tracks hundreds of tokens, indicates a 0.5% decline in the cryptocurrency market. This mirrors the downturn in the U.S. market on Tuesday, with the S&P 500 index dropping by 1.5%, the Dow Jones index by 1.1%, and the tech-centric Nasdaq 100 index closing 1.4% lower.
In contrast, Asian markets saw an uptick on Wednesday, with major stock markets recovering some of their losses from Tuesday. This provided some relief to cryptocurrency enthusiasts. During the early trading hours in Asia, BTC traded at $26,300, while ETH was priced at $1,580.
Elsewhere, alternative tokens displayed lukewarm growth, with only a few tokens registering an uptick. The Maker protocol’s MKR surged by 5.5%, and the Shiba Inu ecosystem’s BONE witnessed a 10% increase, marking the highest among all actively traded tokens.
The increasing participation of institutional investors in the crypto space might be influencing this correlation. The correlation between Bitcoin’s spot price and Wall Street’s tech-heavy equity index, Nasdaq, along with the broader S&P 500 index, has declined to near zero, the lowest in two years, as per data from crypto derivatives analytics firm Block Scholes.
Furthermore, the recent spot bitcoin exchange-traded fund (ETF) filings by giants like BlackRock, Fidelity, and others have infused optimism into the crypto market. Since BlackRock’s filing on June 15, bitcoin has yielded a return of 25%, disregarding the stagnant activity in the U.S. stock indices.