Forex in this article
index in this article
• The correlation between bitcoin and tech stocks is higher than ever
• More predictable cryptocurrency for professional traders
• Bitcoin trading as a substitute for prohibited high-risk transactions
Although the Bitcoin cryptocurrency is often thought of as digital gold – with a similar safe haven status – it is actually moving more and more in sync with the stock market. According to data from “Bloomberg”, the 40-day correlation between Bitcoin and the US tech index NASDAQ 100 hit a new all-time high in April. The oldest digital currency’s correlation with the broader S&P 500 is also higher than at any time since data collection began in 2010. This was determined by social trading platform eToro, according to “Financial News “. Bitcoin has moved in lockstep with the S&P 500 on 77% of trading days this year.
According to the news site, the growing correlation is proof that Bitcoin is moving towards a fairly typical asset class. While this is bad news for investors looking to hedge against market turmoil with cryptocurrencies, professional traders seem to be finding something good in this development — and apparently using it to their advantage.
Institutional Investor Interest in Bitcoin Set to Rise
As “Financial News” writes, Bitcoin is becoming more predictable for institutional investors due to the growing correlation. Because they know – at least approximately – how stocks, bonds, derivatives or commodities behave in different market phases. If cryptocoin now also shows comparable reactions, it may lead to more professional traders entering the crypto market. “It’s obvious that bitcoin is becoming a more conventional market, similar to the ones some crypto maxis have sworn never to touch. Believe it or not, that could be a good thing,” the analyst said. from eToro Callie Cox at the news site.
The fact that more and more institutional investors are interested in cybercurrency was also manifested at the beginning of April at the “Bitcoin 2022” conference, which, according to “Financial News”, also took part in representatives of the bank American investment firm Goldman. Sachs and financial services provider Fidelity. “Discussions on stage and among attendees were reminiscent of a traditional finance conference: institutional involvement, regulation, ratings… even compliance,” Cox said. This shows that Bitcoin is no longer the radical neo-currency it once was.
Bitcoin as a new gambler’s paradise for professionals
According to “Finance News”, trading cryptocurrencies such as Bitcoin could also have an advantage for professional traders. Because following the financial crisis of 2008, big banks and investment companies were banned from making high-risk transactions, for example with certain types of derivatives. Experienced traders who take risks might therefore see Bitcoin as an alternative and increasingly turn to crypto trading, which according to the news site runs through fragmented, often illiquid markets and always has price movements. wild that professional traders could exploit – and at least currently minimally hampered by regulation and compliance rules.
Above all, professional traders would like to take advantage of inefficient markets, according to Finance News. The crypto market with around 600 crypto exchanges in the world is therefore a paradise for them. Brokers previously pointed out to the magazine a popular crypto trading strategy that exploits bid-ask spreads. However, such strategies are only worthwhile for traders who trade with large assets, since these spreads – even if they are considered wide – are usually only very small.
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