Bitcoin enthusiasts have always considered the cryptocurrency a safe investment during times of high inflation and uncertainty, but in recent months, the Bitcoin chart has moved more in line with volatility in the stock market than gold, CNBC writes.
Since the Federal Reserve began monetary policy during the pandemic, both stocks and cryptocurrencies have soared to new records, says Clara Medali, director of research at crypto data firm Kaiko.
The combination of a 10-year US government interest rate peak and several next-time interest rate increases to curb inflation could mean a turbulent way forward for Bitcoin. The interest rate hike triggered a massive sell-off in risky assets like bitcoin, sending the cryptocurrency to its lowest level since September last year.
–It stands to reason that when the liquidity taps are turned off, the two asset classes will respond in the same way, Medali says.
Something more than just a cryptocurrency
Bitcoin has evolved into something much bigger than just a digital asset, says Jeff Druman, investment manager at hedge fund Arca.
Bitcoin’s correlation with the S&P 500, Nasdaq, and the Chinese tech index KWEB has risen over the past 18 to 24 months. Dorman says that bitcoin’s relationship with other digital assets has fallen off.
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