They say that all correlations go to one during a financial crisis.
What's noteworthy about the most recent crash in crypto markets – triggered by the collapse of Sam Bankman-Fried's FTX exchange and his trading firm Alameda Research – is just how divergent the narrative was from traditional markets. That's noteworthy, since bitcoin (BTC), the largest cryptocurrency, was largely trading in sync with U.S. stocks as recently as September.
And despite widespread headlines about the FTX-inflicted turmoil across traditional financial media, U.S. stocks were mostly unfazed – trading higher based on softer-than-expected inflation readings that inspired investor hopes of a less threatening monetary-tightening campaign by the Federal Reserve.
The Standard & Poor's 500 Index is up 3.1% on the month.
An analysis of CMI and its six sector indexes shows how correlations surged among the various digital assets from Nov. 7 to Nov. 11.
The crypto market went into "a highly correlated state after the FTX collapse," said Jodie Gunzberg, managing director of CoinDesk Indices. "The event was (and still probably is) so powerful that it is driving the entire asset class together."
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, 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.