Despite concerns over additional interest rate increases, a declining stock market rally, and a crackdown in the United States, Bitcoin and other digital tokens are sticking out of their 2023 rebound against all odds.
Bitcoin has seen a 50% increase in value since the beginning of the year, further amplified by a jump in February. This is in contrast to the retreat in global equities this month due to concerns surrounding intense macroeconomic growth and inflation.
This recent deviation has negatively affected a previously beneficial connection between stocks and crypto. The correlation between Bitcoin and the S&P 500, which was as high as 0.8 in May, has fallen below 0.3 for the first time since 2021. A reading of 1 indicates that the assets are oscillating in sync, while a correlation of -1 implies the opposite.
Other connections are also undergoing changes. The formerly strong negative correlation between Bitcoin and a dollar gauge is quickly disappearing. Meanwhile, the close connection between Treasuries and the largest digital asset in January has dispersed.
In January, a lot of assets, including digital tokens, experienced a significant increase in value. However, the risk rally for non-crypto assets ended this month as data, such as positive employment numbers in the United States. This ignited a belief that there would not be an immediate increase in borrowing costs.
This resulted in cryptocurrencies outperforming traditional assets. The S&P 500 has produced a return of slightly more than 6% since the start of the year. The Nasdaq 100 has gained almost 13%, and gold has only increased by approximately 1%. On the other hand, the MVIS CryptoCompare Digital Assets 100 Index has risen by 40%.
According to several experts, internal factors within the digital asset industry are impacting speculative investments in tokens. For example, Hong Kong’s decision to adopt a pro-crypto attitude in October generated a positive atmosphere. On Monday, the country presented a plan to give permission to retail investors to trade larger coins.
Smaller tokens that attempt to simplify the process of obtaining staking rewards have surged. For instance, Lido DAO and Rocket Pool’s RPL have risen by 200% and 150%, respectively, since the start of 2023, as per data from CoinGecko.
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