How Crypto Impacts Global Equity Prices
- By Sam van de Schootbrugge
- 5 min read
Summary
• A new IMF working paper explores the connection between crypto and equity markets following a twentyfold increase in the market cap of decentralised assets during the pandemic.
• They find fluctuations in the daily returns of Bitcoin and Tether can explain a sixth of the variation in daily S&P500 returns, up from just 1% pre-pandemic.
• Combined, volatility in the two crypto assets can also explain a fifth of the daily price action in EM equity markets.
Introduction
Bitcoin and Ether are now ranked among the world’s top 20 traded assets. And their market caps exceed some of its largest companies. Their growth during the pandemic reflects a significant rise in the popularity of and participation in the crypto ecosystem. But with all the crypto mania, how are these decentralised markets influencing traditional ones? The key is in the correlations, according to a new IMF working paper.
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