Wall Street does not control bitcoin (yet)

Wall Street does not control bitcoin (yet)

Good morning. Big rally on Tuesday! The bad-news-is-good news theory would hold that it was driven by belief that the situation as it relates to Evergrande is getting worse, so China will loosen policy. The good-news-is-good-news theory would say the key is that Omicron doesn’t look so bad. Take your pick and email us: [email protected] and [email protected].

Is bitcoin just a high beta stock now?

Last weekend, crypto took a tumble. Bitcoin sunk 20 per cent to $42,000 before climbing back a tick. Ethereum and other coins followed.

In the wake of the decline, a popular narrative began to emerge: Wall Street’s big boys have arrived in crypto-land, and this drives stock-crypto correlations up. Bloomberg summed up the zeitgeist:

From the FT:

There is something to the idea that stocks and bitcoin are becoming more correlated, as you can see in this chart of 60-day rolling correlations between the S&P 500 and bitcoin (data courtesy of Coin Metrics):

Since Covid hit, bitcoin has more closely tracked equities. There has also been an uptick in the correlation in recent months. That has led some to declare bitcoin effectively a high-beta stock — a perfect toy for hedge funds.

But the positive correlation remains minor, as you can see