Bitcoin’s decoupling with U.S. equities is proving to be brief with risk aversion again weighing on global asset markets.
The largest cryptocurrency fell for the first time in five trading sessions, dropping as much as 6% to $29,878. The Nasdaq 100 Index dropped for a second straight day. Most other cryptocurrencies also declined, with ether down more than 5%, cardano dropping about 6% and solana slipping more than 7%. Tron was the lone bright spot among the largest digital tokens, rising more than 5%.
Traders had begun to speculate last week that cryptocurrencies such as bitcoin would begin to decouple from risk assets as investors focused more on industry-specific catalysts.
“The ‘decoupling’ a few days ago attributed to some large accounts liquidating ethereum and bitcoin,” said Teong Hng, chief executive of crypto investment firm Satori Research. “Now that those flows have subsided, the correlation kicks back again.”
Analysts have been noting all year that cryptocurrencies and stocks have been joined at the hip when it comes to their moves. When one goes up on any given day, the other tends to follow, and vice versa. Correlations between stocks and bitcoin have been strong, and the relationship is even more pronounced between the coin and tech stocks, which can sometimes be thought of as more speculative plays in the market.
The 90-day correlation coefficient of bitcoin and the tech gauge now stands above 0.68, among the highest such readings in Bloomberg data going back to 2010. A coefficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.
Tron was the exception to Wednesday’s crypto slide. The token has rallied since controversial crypto entrepreneur Justin Sun launched his own stablecoin on his Tron network just before the collapse of the TerraUSD (UST) stablecoin last month.
This article was provided by Bloomberg News.