Why Bitcoin And Ethereum Saw A Spike In Correlation With Asian Equities

The International Monetary Fund (IMF) published a study on the spike in positive correlation with Bitcoin (BTC), Ethereum (ETH), and Asian equities. The financial organization claims digital assets began an accelerated integration with the region during the pandemic as more people traded them looking to generate yield. From 2020 to its all-time high in 2021, the crypto total market cap increased by over 20-fold which led Bitcoin and Ethereum into price discovery. As seen in the chart below, the total trading volume for cryptocurrencies rose very close to $900 billion from below $100 billion at its peaked in 2021. The regions with the highest trading volume are the Americas and Europe. The Middle East and Central Asia, EM Asia, and AE Asia are below other regions. However, the IMF claims adoption of cryptocurrencies in Asia could pose a systematic risk for the financial world. If the price of Bitcoin and the crypto market reclaim their previous levels, and re-entered price discovery, the financial institution believes that there could be negative consequences. If digital assets were to rise and crash as they did over the past year, “contagion could spread through individual or institutional investors”. As cryptocurrencies trend lower these investors would allegedly “rebalance their portfolios, possibly causing financial market volatility or even default on traditional liabilities”, the IMF said. In that sense, the financial ins...