Bitcoin has witnessed a heavy correction this year along with the U.S. equity market plunging down as the Fed hints at interest rate hikes ahead this year. Although bitcoin has been correcting a lot, its adoption among mainstream retail investors is growing.
But banking giant Goldman Sachs believes that it won’t be enough to boost the Bitcoin price. In a note to investors on Thursday, January 27, Goldman strategists Zach Pandl and Isabella Rosenberg wrote that despite Bitcoin gaining mainstream appeal, its correlation to other macro assets also has been on the rise.
Strong liquidations in Bitcoin and crypto have often followed the liquidations in the equity market. As per the Bloomberg data, Bitcoin’s correlation with the S&P 500 has reached the highest ever.
Bitcoin’s Positive Correlation With Proxies
The report shows that the price of Bitcoin has been positively correlated with some of the “frontier” technology stocks, crude oil prices as well as proxies for consumer-price risk like breakeven inflation. On the other hand, Goldman notes that Bitcoin has been negatively correlated with USD and real estate. It explains:
Crypto’s recent selloff underscores that “mainstream adoption can be a double-edged sword,” the strategists wrote. “While it can raise valuations, it will also likely raise correlations with other financial market variables, reducing the diversification benefit of holding the asset class.”
The recent fall in the crypto market has been because of the Fed hinting at rising interest rates ahead this year owing to a high inflation. The strategists added: “Over time, further development of blockchain technology, including applications in the metaverse, may provide a secular tailwind to valuations for certain digital assets. But these assets will not be immune to macroeconomic forces, including central bank monetary tightening.”
Bitcoin and many other altcoins have already corrected more than 50% from their all-time highs. Do you thing, the BTC price can further tank under $30,000?