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As we all know, generally hedge funds will introduce correlation indicators as an important reference for investment and asset allocation. It can help investors eliminate market noise and extract the key factors that truly affect market trends. Since last year, there has sometimes been a positive correlation between U.S. stocks and the currency circle, but it does not exist for a long time. The correlation between BTC and the Nasdaq has maintained a positive correlation to a certain extent since the beginning of last year. It was not until September that BTC began to decline, partly due to large funds selling
the news caused. Many investors want to know more about the relationship between U.S. stocks and the currency circle? Now let the editor of the currency circle give you a good introduction to the correlation between US stocks and the currency circle.

 Are U.S. stocks closely related to the currency circle?

There is sometimes a positive correlation between U.S. stocks and the currency circle, but it does not exist for a long time. During most of Bitcoin's life cycle, there was basically not much correlation with traditional U.S. stocks, and sometimes it even showed a negative correlation. sex. Because of this, Bitcoin is often seen as a diversified investment portfolio or an inflation hedge asset. However, in recent years, people have found that the correlation between Bitcoin and U.S. stocks has continued to rise, and investors cannot be sure. Is this coupling between Bitcoin and U.S. stocks a short-term phenomenon or a long-term trend?

ProShares Bitcoin Strategy
ETF (BITO) is the first and largest Bitcoin futures ETF in the United States, with an asset management scale of approximately US$706.3 million. The ETF has a high correlation with spot Bitcoin (the current indicator value reaches 0.98). Since the beginning of 2022 to date, ProShares
Bitcoin Strategy
ETF (BITO) has fallen by more than 55.3%, compared with the 54.4% decline in spot Bitcoin prices over the same period (the difference is due to rolling costs on future contracts, which creates a small drag over time).

 Interpretation of the correlation between US stocks and the currency circle

For now, the crypto market has two views on the correlation between Bitcoin and U.S. stocks:

First, when the market is volatile and the market direction is uncertain, seemingly unrelated asset classes will show higher correlations. In fact, with the exception of Bitcoin, even the bond market, which is negatively correlated with U.S. stocks, has shown an increasingly positive correlation with U.S. stocks throughout 2022.

Second, the correlation shown by Bitcoin and U.S. stocks may be attributed to the increasing maturity of the cryptocurrency market. It's been about 15 years since Bitcoin's inception, but the cryptocurrency's penetration into mainstream investing has accelerated over the past few years.

A few examples: In April 2021, Coinbase (COIN) IPO; 6 months later, in October 2021, ProShares, the first futures-based exchange-traded fund in the United States
Bitcoin
StrategyETF (BITO) is officially listed. Additionally, institutional adoption continues to grow, with the U.S. Securities and Exchange Commission, the Federal Reserve, and other financial regulators starting to take cryptocurrencies seriously like any other exchange-traded security

However, with limited historical data and no precedent, it is difficult to tell what the correlation between Bitcoin and U.S. stocks will look like in the future. However, as the market normalizes, this correlation may decouple slightly, but it may remain high given the increasing maturity of the crypto market.

On the other hand, a higher correlation between cryptocurrencies and U.S. stocks may not necessarily be a bad thing. Frankly speaking, many investors have begun to use Bitcoin and Bitcoin-related U.S. stocks as a "return enhancer", and some investors will also Crypto as part of one's own technology investment allocation will typically allocate around 1-5% of the total portfolio. With Bitcoin price hovering in the $20,000 range, investors may consider this a good entry point to build or increase an investment allocation.

The above content is the detailed explanation of the editor of the currency circle on the question of whether U.S. stocks have a big relationship with the currency circle. Cryptocurrencies and stocks are both valid investment options that you can use in your portfolio for different purposes. The cryptocurrency industry reached a peak market capitalization of $3 trillion in the fall of 2021. The sudden surge in value and rapid development created huge fortunes for early cryptocurrency investors. Investors can of course purchase cryptocurrencies themselves, perhaps by purchasing several different cryptocurrencies in small amounts. But a better way to get into the industry is to invest in larger, more established companies that benefit from the growing popularity of blockchain and cryptoassets.