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An article in the Wall Street Journal (WSJ) published today, December 28, suggests that the correlation of Bitcoin (BTC) with traditional asset markets has been elevated in recent days.
Quoting the data of the research company Excalibur Pro Inc., the WSJ states that the most important cryptocurrency is exchanged at a correlation of 0.84 with gold in the last five days, where -1 indicates complete inversion and +1 correlation perfect. In addition, Bitcoin traded 0.77 correlations to the Chicago Volatility Board of Options Exchange (VIX), a benchmark index for US equity market volatility.
While the WSJ frames the strong correlation between traditional markets and what the article defines as the first rebel cryptocurrency, Bitcoin, as something of an unexpected turnaround of fate, the article also offers several explanations on the because the model could have been formed.
The first is the influx of institutional money related to the encrypted space, with the WSJ citing the growth of Grayscale Investments' over-the-counter (ETF) over-the-counter fund, the Bitcoin Investment Trust, as a prime example.
As per article, trust saw $ 51 million of assets under management (AUM) during its first year (2013). By the end of 2017, AUM had risen to around $ 3.5 billion in the midst of the scrambled bull market. Recently – due to the so-called "winter crypt" – reported confidence has maintained about $ 900 million of AUM.
Another factor offered is venture capital investment (VC). The WSJ reports that while in 2013 the VC investment in Bitcoin and in the blockchain sector was around $ 96 million, this rose to $ 500 million in 2016 and over $ 2 billion in all VC encryption investments until end of 2017. The WSJ offers no new data for 2018.
As the article notes, an attraction factor for traditional capital in crypto is the construction of trading services and infrastructures with high regulatory compliance; the advent of the encryption of futures and tries to get a broad acceptance for cryptographic ETFs.
As reported, the cryptographic space continues to undergo far-reaching transformations; Key developments at the horizon include the launch of the Bakkt Bitcoin futures exchange from Intercontinental Exchange, the launch of the digital asset business of the investment giant Fidelity and the continuing influx of loyal investors such as Yale, Harvard and Stanford.
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