Inflation came in at another record high, this time reaching 8.5% for March in its fastest gain since 1981. The last seven days have seen cryptocurrencies falling as investors braced for the CPI announcement, with bitcoin’s correlation to risk assets remaining high, according to a report from Arcane Research.
Bitcoin tends to be highly correlated to risk assets in times of macro fears when advisors and investors pivot to a risk-off approach. The popular cryptocurrency currently remains closely correlated to ether over a 90-day span at 0.91, its highest rate of correlation since June 2020, and the 90-day correlation for the S&P 500 was the highest ever as of two weeks ago at 0.52.
“As we approach the middle of April, we see a broad correction in the whole crypto market, with most coins following each other closely on the way down,” writes Jaran Mellerud, analyst at Arcane Research and author of the report.
Stablecoins have received a boost as investors respond to macro concerns and inflation, with many of those wishing to stay allocated into crypto moving their funds to tether (USDT) and USD coin (USDC), a cryptocurrency that is pegged to the U.S. dollar. USDC is managed by Centre and includes representatives from Bitmain, a bitcoin mining company, as well as Coinbase, a major cryptocurrency exchange.
USDT has seen a 0.58% gain in cryptocurrency market cap thus far in April, while USDC has gained 0.31% in market cap at a time when bitcoin has only gained 0.05%.
“The market continues to take crypto investors on an emotional rollercoaster. For the third time in 2022, the market sentiment shoots up to the ‘greed’ area, only to fall back into fear territory shortly after. Will 2022’s repeated disappointments make market participants more cautious in showing optimism,” asks Mellerud.
Investing in Crypto Assets With Bitwise
For investors who are interested in investing in the innovation of the crypto economy but do not want the risk of direct exposure, the Bitwise Crypto Industry Innovators ETF (BITQ) could be a good solution. BITQ offers investment into some of the largest companies within crypto in a variety of segments, offering the potential benefits that come with diversification.
BITQ tracks the Bitwise Crypto Innovators 30 Index, an index with at least 85% allocation into cryptocurrency exchanges carrying bitcoin and other cryptocurrencies, crypto miners, mining equipment companies, and service providers. The remaining 15% is allocated to large-cap support companies with at least one major part of their businesses dedicated to crypto.
BITQ carries crypto companies that continue to drive growth for themselves as well as the broader crypto economy, including Coinbase Global Inc (COIN) at 9.16%.
The fund has an expense ratio of 0.85% and net assets of $107 million.
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