Coinspeaker
Feb 5, 2025
9 0

Citi Predicts Weaker Long-Term Correlation Between Crypto and Equities

Citi's latest research indicates a potential weakening of the correlation between stocks and cryptocurrency markets. Key points include:

  • The relationship will likely diminish as digital assets mature.
  • Institutional involvement, technological advancements, and broader adoption will contribute to this decoupling.
  • During financial uncertainty, cryptocurrencies may still correlate with risk assets.

Analysts noted that a transparent regulatory regime in the US may lead to more idiosyncratic price actions.

Bitcoin’s Volatility Set to Ease

  • Citi predicts Bitcoin's volatility will decrease as institutional engagement grows.
  • Last year, crypto was the only asset class to expand its market cap relative to US equities.
  • Bitcoin is increasingly aligning with gold, suggesting a potential "store of value" use case.
  • The supply of Bitcoin is capped, contrasting with equities which can adjust supply through buybacks or new issuances.

JPMorgan's Perspective on Bitcoin-Tech Correlation

  • JPMorgan notes Bitcoin has high correlation with small-cap tech stocks, particularly within the Russell 2000 index.
  • This correlation strengthens during major market movements.
  • Many altcoins reflect similar behavior but with generally weaker correlations.
  • The trend highlights crypto's dependence on venture capital and alignment with innovative smaller tech firms.