Bitcoin: Assessing the impact of BTC’s correlation with traditional markets
No, thanks to the worsening macroeconomic conditions, the cryptocurrency market was severely depressed in the last quarter, a new report from Cryptorank (an analytics platform) showed.
After the sharp decimation in the prices of many cryptocurrency assets that plagued the first half of the year, the 3rd quarter opened with a positive price correction for many assets.
The global cryptocurrency market cap recovered to consolidate above the $1 trillion range. The prices of leading assets such as Bitcoin [BTC] and Ethereum [ETH] rose 18% and 56% in the first 31 days of Q3.
However, as the quarter progressed, the market deteriorated and as pointed out by Cryptorank, “even major events like Ethereum’s merger did not lead to significant positive movements.”
BTC within the 90-day period
According to Cryptorank, the leading cryptocurrency BTC saw its price drop by 2% between July and September. While its price rose 18% in July, BTC continued to lose most of its gains between August and September.
Source: Cryptorank
This caused it to close the quarter below the $20,000 price region. As noted in the report, “cryptocurrencies tend to underperform during these two months.”
September is known to have historically been one of the worst months for BTC. The asset’s price “has averaged a fall of 8.5% for the month over the past five years.”
Source: Bloomberg
Cryptorank further found that BTC’s correlation with traditional financial markets increased in Q3, leading it to approach an all-time high.
As a result of this correlation, the asset’s “connection with the global macroeconomic situation has increased significantly,” making it “sensitive to announcements such as inflation data or Fed rate hikes.”
For example, at the last meeting of the Federal Open Market Committee on September 21, when the third consecutive rate hike of 75 basis points was announced, the price per BTC fell sharply by 4.7% minutes after the announcement was made.
Source: Cryptorank
On the primary culprit responsible for the severe price volatility BTC experienced last quarter, Cryptorank stated that,
“The ongoing crisis in the financial markets is one of the main factors currently affecting Bitcoin, and more generally the broader cryptocurrency market. Bitcoin can be a deflationary instrument (its supply is limited and gradually decreases, thus making the coin more valuable), but in the current macroeconomic situation it shows a negative performance due to rising inflation.
Source: Cryptorank
In particular, Bitcoin shares a statistically significant positive correlation with several other cryptocurrency assets. There is no resistance in denying the negative effects that continued volatility in the price of BTC would have on the overall cryptocurrency market.
