The 30-day correlation of Bitcoin with shares reaches a 21-month high

• This increased correlation is primarily due to the decision of the Fed to tighten monetary policy
• The correlation of Bitcoin with the dollar strength index is as high as in March 2020

Analysts from Arcane Research have published a report in which it is described in detail that the 30-day correlation of Bitcoin has reached the shares that have not been seen since July 2020. The article revealed that the correlation of the flagship crypto with gold is now on an all-time low, which is all declining indicators for the leading digital-asset token.

In addition, she found that the correlation of Bitcoin had reached the US dollar index 0.53, the highest value since March 2020, since the dollar continues to win strength.

Effects of US Federal Reserve Policy

An important reason for this shift is the policy of the US Federal Reserve. While the leading digital asset after market capitalization was considered to be the protection of inflation for most of the year 2021, the narrative changes.

Although the US Federal Reserve had retained interest rates in January, she indicated that she was pursuing an aggressive approach by saying that it would raise interest rates in the course of the year in order to counteract inflation with the aim of reducing it to 2 % in the long term.

While the European Central Bank (ECB) takes a more relaxed attitude towards inflation in Europe, the decision of the US Federal Reserve has led to increased correlation with technology stocks.

“The stronger dollar is the result of the restrictive attitude of the FED and the increased expectations of faster tightening of US politics, while the ECB and other central banks are more reserved. Lagarde from the ECB has recently commented that the ECB does not have a clear time frame for when the ECB interest rates start to rise, and that the ECB is a more reluctant reaction pointed to the inflation messages when the market expected ”, explained the blog post.

What does that mean?

The correlation between Bitcoin and technology shares was considered pessimistic for the cryptoma markets. Arcane Research said that the poor performance of technology stocks has been a swing factor for the poor performance of the cryptoma markets in recent months since November

In fact, the correlation with technology shares has been at a significant level since March 2020, which indicates that investors categorize Bitcoin with other risky assets.

"Inflation expectations and FED policy affect the technology. The credit costs become more expensive and growth forecasts narrow. The increased correlation of Bitcoin with technology shares Since March 2020, a picture of institutional investors that bundle Bitcoin with other risk investments."

With increasing acceptance, however, it is expected that the correlation falls off today's astronomical levels.