Bitcoin is dancing after the Wall Street pipe, while more and more large dealers are coming onto the market

Bitcoin reflected the strong fluctuations in the traditional markets this year and emphasized the closer connection between cryptocurrencies and mainstream finance systems, as more and more professional dealers are entering the digital financial arena.

The world's largest cryptocurrency is increasingly pursuing the movements of assets that influence other global markets. The correlations with US technology stocks, crude oil and government bonds have all increased significantly in the past two years, as Goldman Sachs Research shows.

Bitcoin often moved almost in step with Nasdaq 100-Futures-derivatives that were considered a representative of the mood towards America's technology giants-as the markets fluctuated in the first few weeks of 2022. While the price movements at Bitcoin tend to be much stronger than, unlike many traditional financial investments, the connections between the two asset classes attract the attention of analysts and investors.

Before pandemic, Bitcoin and other digital assets showed low correlations to traditional financial market variables-in fact, crypto behaved like a completely different ecosystem, "said Zach Pandl, co-manager of the foreign exchange strategy at Goldman Sachs.

"But in the past two years, when Bitcoin has experienced a broader acceptance in the mainstream, his correlation has increased with macro-assets."

Fundstrat, a boutique research house that reports on both crypto and traditional markets, said customers at the beginning of this week that "cryptoassets continue to have a strong correlation with stocks".

The NASDAQ 100 index of the largest companies that are listed on the Wall Street Nasdaq Composite technology-oriented Nasdaq Composite has so far fallen by about 11 percent this year, while Bitcoin has lost 18 percent. In the meantime, a basket of unprofitable technology shares that, like Bitcoin, are 23 percent fallen by 23 percent.

A growing number of hedge funds is now relating to cryptocurrencies, while the Wall Street banks offer their customers services such as the award and custody of digital assets and high frequency trading companies are increasingly active in this area. At the same time, large specialists for digital assets such as Galaxy Digital and Genesis Trading play a much larger role in a market that was once dominated by retailers.

The entry of large financial actors into the market is one of the main reasons why Bitcoin now behaves more like a traditional risky asset, say analysts and dealers.

The emerging behavior of Bitcoin as a asset that investors buy when investors see the economy optimistically or sell if they are nervous, is also supported by examinations by Nick Metzidakis, head of quantitative research at the digital asset specialist Tyr Capital.

"Bitcoin has been correlated positively with the Nasdaq in the past five years and behaves effectively like a risk -friendly asset," said Metzidakis. "This relationship has become stronger since the beginning of 2020 and indicates that .. Bitcoin is seen as" risk-on "or" technology game "."

Metzidakis also found that the US labor market report, which is considered one of the most important economic data that is published every month, also influences the price of Bitcoin, as is the case with many other actively traded assets.

However, analysts find that Bitcoin price movements are often triggered by crypto-specific factors Coin itself or the market for digital assets in the broader sense.

Marcello Mari, the managing director of Singularity Dao, a trading company for cryptocurrencies, said that the rate with which new Bitcoin units were dismantled, the so-called hashrate, and the amount of dollars that keep miners in reserves.

The influence of large Bitcoin owners, known as "whales", is still strong because the digital coindie ownership of are still very concentrated.

At the same time, regulation and possible changes to the financial rules in the large economies also acted as strong drivers of the Bitcoin Prize, INIGO Fraser-Jenkins, co-manager for institutional solutions at Allianceberg. Bitcoin, for example, crashed last May when the Chinese supervisory authorities announced a hard approach to the use of digital coins.

"At the moment there are very few empirical evidence that Bitcoin as a diversif for inflation or stock risks. In fact, the correlation of Bitcoin into shares in the early stages of Covid has risen," said Fraser-Jenkins.