Trading volume for cryptocurrencies and their derivatives fell in June. The reluctance of the market strongly affects a very fragile industry. Bitcoin price changes indicate a decrease in the correlation between the asset and the stock market. However, the correlation between the two assets remains strong.
Trading volume falls 28% in June
The first half of 2022 has been a nightmare for increasingly nervous cryptocurrency investors. Compared to May, cryptocurrency trading fell 28% in June. They reached $ 1.4 trillion, the lowest level since December 2020, according to CryptoCompare.
Across the cryptocurrency and derivatives market as a whole, trading volume reached $ 4.2 trillion (-15% month-on-month). Derivatives now account for half of the cryptocurrency market, another sign that the crypto industry is in an established crisis.
Market value (or market value) is the total dollar value of all shares in a company (or, in the case of Bitcoin or other cryptocurrencies, all coins that have been mined). In the case of cryptocurrency, the market value is calculated by multiplying the value of a token at a given time by the total number of tokens extracted at the same time. If not all tokens have been extracted, it is interesting to multiply the value of it by the maximum theoretical number of tokens.
Market value can be compared to targets that assess the probability that a given asset is stable. It is important to note that even Bitcoin, the largest market value among cryptocurrencies, is still subject to volatility. But like a larger ship sheltered from the weather, a cryptocurrency with a greater market value is more likely to be more of a stable investment than one with a much smaller market value.
Conversely, digital currencies with lower market values are therefore more vulnerable to market sentiments and may experience significant gains or losses as a result.
The correlation between Bitcoin and Nasdaq is falling
According to data collected by Bloomberg, the 40-day coefficient between Bitcoin and the Nasdaq 100 has dropped to below 0.5. A level not seen since last January. At the end of June, the correlation coefficient was 0.6. Last May, it even reached the threshold of 0.85, proving that there is a very strong correlation between the two asset classes.
At that point, stocks and digital assets fell as the Federal Reserve announced it would raise interest rates by 0.5 percentage points. That was a record at the time.
In June, the Bitcoin price fell far more than the Nasdaq. Currently, Bitcoin is trading around $ 20,000, roughly where it was at the end of 2020. Looking at the Nasdaq 100, the current level is heading for a low point in 2022. If the analysis focuses on Bitcoin, it is clear that the decline in the correlation is also attributable to larger altcoins.
“If this still positive correlation continues to fade, one may wonder if depreciated virtual assets are close to the bottom and ready for a rally.” reports Bloomberg.
A decrease in the correlation index does not mean that there is no longer a correlation between the two elements. In fact, Bitcoin remains subject to the same macroeconomic indicators as stocks in the world’s largest market, such as with the war between Russia and Ukraine or even the US Federal Reserve’s monetary policy.
As such, investors in the crypto and stock markets will continue to monitor certain macroeconomic variables, such as employment rates, but especially inflation in the US and Europe. The latest US inflation data released yesterday showed that prices generally rose 9.1% over the past 12 months. The risks of recession, which have often been pointed out in recent weeks, should also boost the debate around all risky assets.