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    Bitcoin correlations

    Bitcoin prices are up. Stocks are mostly up today. And a new report from Kaiko has shown that Bitcoin’s correlation with the NASDAQ and S&P 500 are now at their highest level since July at 2020. Two questions here. What do you think has been driving this increased correlation with more traditional risk assets, and what does this mean going forward for crypto investors?

    GREG KING: Yeah, great question, and I think you put your finger on the crux of what’s happening. So crypto’s acting a little bit more like tech investing, and that’s for a couple of reasons. I think, number one, people are starting to recognize that, aside from Bitcoin– you know, the digital substitute for gold– a lot of crypto is tech investing. These are really emerging tech products– projects that are being observed as they develop in real time. And so the correlations are getting higher between crypto overall and tech investing as Bitcoin’s dominance kind of fades.

    But number two, I think it’s a good thing in the sense that institutions are involved. And so, you know, the pro there is that’s going to continue to drive flows into the space. The con is really that institutions kind of behave a little bit more in tandem. And so following a big year like 2021 where you did see Bitcoin up, I think, 60% plus and Ethereum over 400%, you’re going to have some repositioning at the end of the year. You’re going to have some churn and so on. But we think it’s great that the crypto space is broadening out and people are looking at it more like tech investing and the institutions continue to move into the space.

    ADAM SHAPIRO: What are– we keep hearing the naysayers, and you’d think they would have been buried in 2021 who keeps saying Bitcoin is a bubble. Ethereum and crypto are never going to, you know, be anything. What are these– perhaps I’m going to use the term dinosaurs– missing?

    GREG KING: Dinosaurs, yeah. Well, I think– you know, I like to separate the debate because a lot of the– let’s call them neophytes– don’t understand that crypto is just so much bigger than Bitcoin because Bitcoin was first. It’s still the biggest. It’s kind of– it leads every conversation. But Bitcoin was really created to solve a different problem than the vast majority of what’s happening in crypto now, right?

    So you have the whole digital gold debate, the debate around inflation, and I think they’re– you know, they’re just going to have to catch up because Bitcoin is here to stay. It’s very clearly a store of value. Probably, you know, more volatile than a lot of us would like, but over time that should dampen down as this secular S curve of adoption takes place and we move farther down the road.

    But as I was saying earlier, the rest of crypto, broadly speaking, is a bunch of tech, right? What’s happening is the old model of centralized technology that’s being created and held within corporations is being disintermediated by a bunch of projects, and they all have different focuses. But really there are a lot more analogies to what happens when you invest in emerging tech than something as kind of ethereal as digital gold, right?

    At the end of the day, a lot of these projects do have real-world applications, and you’ve seen that with DeFi. You’ve seen that with the NFT space, and there’s a lot more to come.

    So I think, you know, it’s sometimes a generational question. Sometimes it’s a, you know, tech savvy type of question in terms of where people are on their own personal adoption. But I’ve been talking to people about crypto for eight years, and, you know, the vast majority of people that I talk to now are well on their way to accepting that this is a thing and it’s not going away.

    EMILY MCCORMICK: In terms of crypto adoption and Bitcoin adoption specifically, we’ve been hearing a number of headlines– for example, New York Mayor Eric Adams saying he would take his first three paychecks in Bitcoin. Just earlier today, the Northwest Arkansas Council saying it will begin offering $10,000 in Bitcoin to incentivize tech professionals to move to the region. I’m wondering, these are catchy headlines, but what do you think this says, if anything, about Bitcoin adoption and what this means going forward for investors in the space?

    GREG KING: Look, I think it’s great. I can’t believe I’m behind Arkansas because I haven’t implemented our– you know, our employees can get their paychecks in Bitcoin yet because we’ve been talking about that. But I think– look, clearly people understand that– those people, anyways, understand that Bitcoin is here to stay. And, you know, they could have easily in Arkansas, for example, said, well, we’ll just give you $10,000 and a bike, you know, but they said Bitcoin. And why? Because I think that appeals to the crowd that they’re seeking, right?

    So they’re seeking the tech-savvy, you know, intelligent, progressive, kind of hardworking young crowd that wants to be part of building this dynamic future. And so delivering that, you know, reward in Bitcoin instead of dollars I think just kind of makes it that much more attractive to that crowd.

    So do I think that, you know, Fortune 500 companies are going to pay their employees in Bitcoin? Probably not. But it is kind of interesting to see this happen, and, you know, there’s people in sports that have done it too. And, you know, don’t forget there’s only 21 million bitcoins, so this is just all– all these people kind of coming into the ecosystem with a finite supply really does have an effect on price over time.

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