According to Bloomberg News, the biggest digital currency in the world has been dormant although, it is six weeks into 2022. Based on the price movement of five years, Bitcoin, the largest cryptocurrency, has moved beyond one standard deviation from the average in both directions just five times till now, as per data gathered by Bloomberg. This compares to almost 12 times for NASDAQ 100 index. The other instance when a similar event occurred was in 2020, in the last five years when the pandemic had just started and was roiling the equity markets.
The increasing speculation about how Federal Reserve will act to tighten the policies and tame high inflation, which is at an all-time high, has triggered historic volatility of the richly valued stocks. However, Bitcoin has not been subjected to such battering of the same extent because the markets witnessed large leverage of siphoned out from the market amidst a 50% drawdown of the cryptocurrency from November through mid-January.
The NASDAQ 100 showed a drop of nearly 13% in 2022, exceeding a decline of 8% in Bitcoin. The tech-heavy index has manifested to be even more volatile compared to Bitcoin in the current year, even though it had few trading days. It may be mentioned here that cryptocurrencies trading takes place all weekend.
Bloomberg News also states that a tight linkage still exists when it comes to both the asset classes. As per data that Bloomberg has gathered, a 40-day correlation coefficient of Bitcoin with NASDAQ 100 exists at an all-time high.
The brutal sell-off of Bitcoin in January that caused prices to nosedive below $33,000 seems to have left a mark as far as the risk appetite is concerned. The crypto exchanges‘ total spot volume slid to $1.8 trillion in January, a drop of 30% plus from what it was in the previous month, as per a report provided by CryptoCompare.
Fading turbulence and the trading volume could signal trouble for the crypto markets even though volatility is appealing. According to Kraken’s Juthica Chou, the fact that stocks were not exciting but boring acted as a big catalyst for the bull run of Bitcoin in 2017. The NASDAQ 100 recorded only 11 moves of standard deviation or more in 2017 compared to Bitcoin’s 92 tallies.
