DBS Says Bitcoin Affects Stock Markets, Is 'No Longer Fringe Asset'

The study found the correlation with S&P 500 futures rose during big bitcoin moves.

AccessTimeIconMay 26, 2021 at 10:37 a.m. UTC
Updated Sep 14, 2021 at 1:02 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

A new study from Singapore-based banking giant DBS indicates that the influence of bitcoin has grown to the extent it now has the ability to affect stock markets during big price moves.

  • Published Tuesday, the research report titled "Shifting cross-asset correlations" sets out to examine how different assets, including bonds, equities, bitcoin and gold, may influence each others' markets.
  • Looking at data from November 2020, when bitcoin experienced a major growth in market cap, DBS found that the top cryptocurrency has been positively correlated with S&P 500 futures in every month since.
  • The authors, Chief Economist Taimur Baig and credit and FX strategist Chang Wei Liang, said this means bitcoin can be considered a "risky asset," though they add that the average correlation is "relatively low" at 0.20.
  • They also looked at whether extreme moves in bitcoin could have a knock-on effect on stock markets, finding that the correlation with S&P 500 futures rose to 0.26 during volatile events, from just 0.19 in normal conditions.
  • "This suggests that broader equity sentiment could become more coupled with sentiment in bitcoin markets for a temporary period of time (60h), post an unusually large move," the authors wrote.
  • Other statistical tests backed up the data and showed that stock market volatility was "markedly higher than normal" after a big move in bitcoin.
  • As such, the authors concluded that "bitcoin is no longer the fringe asset that it once was," and suggested market participants should monitor developments in the bitcoin market when conducting risk and sentiment monitoring.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.