- Crypto market destination depends on the stock market, says Barry Silbert.
- Silbert suggests that stocks are the key indicator for risk investors.
- Correlations between the Nasdaq-100 and BTC are much higher at the beginning of 2021.
Barry Silbert, a powerful member in the digital-asset sector explained that investors need to look no further than the stock market, according to a tweet amid a downturn in digital assets.
Where the crypto market goes from here is completely dependent on the stock market over the next couple weeks
— Barry Silbert (@BarrySilbert) May 24, 2021
However, some of the turmoil being experienced in crypto assets connected to China’s breakdown in the sector. More so, the crypto-focused site reported that a crypto exchange, Huobi, may scale back some of its offerings. It also suspends some of its miner-hosting services in a few countries. Due to the Chinese government’s hard-line stance on virtual currencies.
Even more, a number of market participants tried to explain that crypto’s recent slump has less to do with the fundamentals of crypto assets and the regulatory landscape. In addition, more to do with Wall Street’s appetite for speculation. In this case, Silbert suggests that stocks are the key indicator for the risk investors can stomach in crypto, and not the other way around.
Moreover, Silbert is considered a luminary in the crypto world. However, after identifying two of the most known enterprises in crypto — Grayscale Investments and Digital Currency Group. More so, he is also an early investor in firms like trading platform Coinbase Global and a blockchain-focused startup Ripple.
In addition, he also knows a thing or two about equities — Second Market, a popular trading exchange for private-company stock. It was founded in 2004 and sold to Nasdaq Inc. in 2015 for an undisclosed amount.
Correlation of Stocks and Cryptos
Silbert’s view that stocks may be influencing crypto has more to do with how much-borrowed money is swirling around in equities, and how institutions that are newly invested in bitcoin react to this current slump.
However, stocks and crypto are not supposed to be correlated. Recently, some have pointed out that tech stocks are seemingly reactive to crypto-based news. In line with this, market participants have pointed out the short-term correlations between Nasdaq-100 futures, and bitcoin.
bitcoin and nq futures all the same trade right now pic.twitter.com/qzoX8E5XuA
— Alastair Williamson (@StockBoardAsset) May 21, 2021
On a long-term basis, correlations between stocks and the Dow Jones Industrial Average DJIA, the S&P 500 index SPX, and the Nasdaq Composite COMP, never seem to be apparent. Based on a rolling 20-day correlation of the Nasdaq-100 and bitcoin, the correlation sits at 0.19. All-in-all, a correlation of 1 indicates that the two are synced perfectly. Moreover, 0 means no correlation, and -1 indicates the two are going in the opposite direction. More so, the correlations between the Nasdaq-100 and bitcoin are much higher at the beginning of 2021, at around 0.64 in mid-January. Furthermore, with greater institutional involvement in crypto, the two assets start to demonstrate greater ties.