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Breaking News: Tether Faces Downgrade By S&P Global Amid Concerns Over Disclosure And Assets Holdings

Why Bitcoin And Ethereum Saw A Spike In Correlation With Asian Equities

Reynaldo Marquez
Reynaldo Marquez
Last Updated: June 11, 2024 7:19 am
2 mins read
bitcoin

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The International Monetary Fund (IMF) published a study on the spike in positive correlation with Bitcoin (BTC), Ethereum (ETH), and Asian equities. The financial organization claims digital assets began an accelerated integration with the region during the pandemic as more people traded them looking to generate yield.

From 2020 to its all-time high in 2021, the crypto total market cap increased by over 20-fold which led Bitcoin and Ethereum into price discovery. As seen in the chart below, the total trading volume for cryptocurrencies rose very close to $900 billion from below $100 billion at its peaked in 2021.

The regions with the highest trading volume are the Americas and Europe. The Middle East and Central Asia, EM Asia, and AE Asia are below other regions. However, the IMF claims adoption of cryptocurrencies in Asia could pose a systematic risk for the financial world.

Bitcoin BTC BTCUSDT IMF 1
Source: IMF

If the price of Bitcoin and the crypto market reclaim their previous levels, and re-entered price discovery, the financial institution believes that there could be negative consequences. If digital assets were to rise and crash as they did over the past year, “contagion could spread through individual or institutional investors”.

As cryptocurrencies trend lower these investors would allegedly “rebalance their portfolios, possibly causing financial market volatility or even default on traditional liabilities”, the IMF said. In that sense, the financial institution shared the chart below to show the contrast between the price of Bitcoin and Asian stock indexes.

Bitcoin BTC BTCUSDT IMF 2
Source: IMF

From 2020 until 2022, this correlation seems to be trending upward with Thailand and Vietnam showing the highest positive correlation. This has translated into similar price action for Bitcoin and traditional equities in these countries.

In India, the correlation between the price of Bitcoin and local equities has increased by 10-fold with a 3-fold spike in volatility correlations. The financial institution believes that if the price of Bitcoin decreases or increases, there could be “spillovers of risk sentiment”.

Can Bitcoin Lead The Asian Markets Into A Shock?

The financial institution suggests that these “spillovers” are already happening in Asia. Therefore, authorities in the region have been working on implementing a regulatory framework to allegedly mitigate risk.

The financial institution failed to mention that Bitcoin has been showing a positive correlation with the performance of major equities indexes across the world, the phenomenon is not limited to Asia. As seen below, the price of BTC has been moving in tandem with the Nasdaq 100 since the start of 2022.

Bitcoin BTC BTCUSDT IMF 3
BTC’s price and Nasdaq 100 moving in tandem. Source: TraderFromTheNorth on Tradingview

The positive correlation has been attributed to current macroeconomic conditions. These indexes often move-in tandem with macroeconomic events, such as the one the market has experienced since 2020.

Therefore, the positive correlation between Bitcoin and Asia equities could also be attributed to the cryptocurrency reaching high adoption levels rather than a tale sign of potential financial risk.

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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

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