Wednesday, July 24, 2024

Bitcoin Price Appears Correlated With Financial Market Variables: Report

The price of bitcoin appears positively correlated with proxies for consumer-price risks like breakeven inflation and crude oil prices, says Goldman Sachs Group strategists Zach Pandl and Isabella Rosenberg. They believe that cryptocurrencies are negatively correlated with real interest rates and the US dollar.

The strategists highlighted that while it can raise valuations, it will also likely raise correlations with other financial market variables. As such, it will reduce the diversification benefit of holding the digital asset class. The tightening of monetary policy and increasing real rates have hurt cryptocurrencies.

It has hit the crypto market capitalization, wiping out more than half from $3 trillion in November 2021 to $1.7 in January of 2022. The Goldman strategists say that further development of blockchain technology may provide a secular tailwind to valuations for certain digital assets. They highlighted that cryptocurrencies will not be resistant to macroeconomic forces.

Goldman Sachs has also brushed off the concept of cryptos being seen as a tool to make the mass populace rich overnight. The multinational investment bank argued that while crypto can raise valuations, it will also raise correlations with other financial market variables. It will reduce the diversification benefit of holding the asset.

Lloyd Blankfein, former CEO at Goldman Sachs, this week in an interview said crypto is evolving. He said he can’t predict the future, but with crypto it is happening. The executive acknowledged that crypto market has lost a lot of value. He also pointed out the fact that whole ecosystems are growing around it. There are also benefits such as reduction of credit risk, blockchain technology and instantaneous transactions.

Cryptured Team
Cryptured Team
The writers team at Cryptured.com is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.
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