FTX US Chief Brett Harrison Says Crypto Markets’ Correlation With Stocks Not What Traders Think – Here’s Why
Brett Harrison, CEO of crypto alternate FTX US is giving his tackle why digital asset markets appear to be intently correlated with US inventory indices.
In a prolonged thread, Harrison addresses a typical criticism of crypto not being inflation hedge or a portfolio diversifier because it strongly correlates with the inventory market.
“Each interview I’ve watched (or performed) not too long ago consists of questions on obvious correlations between shares and crypto, often amid dialogue of whether or not crypto is (1) inflation hedge, (2) a portfolio diversifier, (3) an unbiased retailer of worth.”
Harrison says the explanation for the correlation is that the identical massive gamers who’re working in equities markets are additionally concerned in crypto, making the asset courses transfer in tandem.
“I believe nearly all of what we’ve seen with crypto and fairness correlations within the final a number of months comes purely from [extrinsic buy/sell pressure].
World property are down, throughout shares, bonds, and crypto. Giant establishments with allocations throughout these totally different asset courses will search for parts of their portfolio to unload to cut back danger, enhance money balances, cowl margin calls, and so on
Put one other means, in down markets most correlations go to 1. Taking a snapshot of correlations at any given time doesn’t inform the story of the intrinsic worth of an asset, nor what its true relationship is or ought to be to different property.”
In statistics, a correlation coefficient of 1 signifies an ideal linear relationship.
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Featured Picture: Shutterstock/prodigital artwork/Natalia Siiatovskaia
