Citi Predicts Diminishing Link Between Equities and Cryptocurrency Market

A recent report indicates that the connection between the stock market and crypto assets is set to weaken as digital asset adoption increases.

Key Insights:

Dominant Macro Driver: Stocks have been highlighted as the primary driver impacting the cryptocurrency market.
Future Expectations: As digital asset adoption escalates, the correlation between equities and bitcoin is forecasted to diminish over time.
Regulatory Clarity: Increased regulatory clarity in the U.S. is anticipated to shift crypto prices away from macro influences.

Detailed Analysis:

According to a research note from Citi, the relationship between stocks and the cryptocurrency markets is likely to decrease. While equities dominate as the most significant macro factor influencing cryptocurrencies, this correlation is expected to decline as the market matures and expands.

The bank’s analysts, led by Alex Saunders, assert, “A more transparent regulatory regime in the U.S. will also lead to more idiosyncratic price action.” Furthermore, volatility in bitcoin is expected to lessen as institutional adoption rises, and it’s noted that last year saw crypto’s market cap increase relative to U.S. equities.

The interaction between bitcoin and gold is also a point of interest, reflecting the potential of bitcoin as a ‘store of value’.