Steering through a sea of change in the crypto market, the investment game is experiencing a seismic shift. Spot Bitcoin ETFs already exist, signaling Bitcoin’s leap into mainstream finance and knitting it closer to conventional investment fabrics. We’ll look at the tip of the iceberg trying to imagine its true depth as well as the current correlation between Bitcoin, stocks, and Gold. We\u2019ll attempt to figure out if the traditional market is really leading Bitcoin out of its decentralized place, or if there’s still an avenue for hope that it can maintain its unique path.<\/p>\n
According to the Kaiko data, Bitcoin’s risk-adjusted returns were superior to traditional assets. Nvidia led with the highest returns on a risk-adjusted basis, while Bitcoin impressively trailed just behind, outpacing major traditional assets like the S&P 500, Gold, with its value surging over 160% in risk-adjusted terms. <\/p>\n
Source: Kaiko Research<\/em><\/p>\n Meanwhile, according to the IMF Crypto Cycle and US Monetary Policy study, 80% of variation in crypto prices and its increasing correlation with equity markets coincided<\/a> with the entry of institutional investors into crypto markets since 2020. In particular, trading volumes by institutions on crypto exchanges grew by more than 1,700% (from roughly $25 billion to more than $450 billion) during the second quarter of 2020 and the second quarter of 2021. According to the study, the US monetary policy affects the crypto cycle, just like global equity cycles, but surprisingly, only the US Fed’s monetary policy matters, not the other major central banks \u2013 probably because crypto markets are highly USD-dependent.<\/p>\n Furthermore, the 2023 Institutional Investor Digital Assets Outlook Survey indicates<\/a> that 64% of investors are set to up their stakes in the crypto sphere within three years, allocating up to 5% of AUM to crypto. It said a number of institutions made investments for the first time over the past year, while others increased their existing investments. While the study highlights a surge in crypto commitment from 41% of asset managers, only 27% of asset owners seem to be ramping up their stakes.<\/p>\n Although Bitcoin was born from the idea of spreading power equally, recent studies indicate that it’s slowly becoming dominated by a select few big players.<\/p>\nChanging Correlation Dynamics<\/h2>\n