During the recent days, the correlation with traditional assets markets and Bitcoin (BTC0 has been growing stronger in the recent days, as suggested by Wall Street Journal (WSJ) article published today, Dec. 28.
The published article cited the data from research firm Excalibur Pro Inc. and states that BTC has traded at a 0.84 correlation to gold over the past five days, where -1 indicates complete inversion and +1 perfect correlation. Furthermore, BTC has traded at a 0.77 correlation to the Chicago Board of Options Exchange’s Volatility Index (VIX), setting a benchmark index for the United States equity market volatility.
On one hand, WSJ illustrates a strong correlation between traditional markets and on the other, the article also portrays BTC’s success as an unexpected twist of fate offering several explanations about the reasons for the same.
The article quoted an influx of institutional money into the crypto space as on the reason. The WSJ cites the growth of Grayscale Investments’ over-the-counter exchange-traded fund (ETF), the Bitcoin Investment Trust, as a prime example. According to the article, the trust observed during its first year (2013) and saw $51 million in assets under management (AUM).
By 2017 end, the crypto bull surges the AUM to around $3.5 billion and despite the “crypto winter”, the trust reportedly retains about $900 million AUM.
WSJ also factored venture capital (VC) investment., reporting that in 2013, VC investment in Bitcoin and the “https://cointelegraph.com/tags/blockchain”>blockchain sector was at around $96 million, which grew to $500 million in 2016 and to over $2 billion in all-time VC crypto investment through the end of 2017. no data was provided for 2018.
The article further notes, a pull factor for traditional capital into crypto is the building of trading services and infrastructure with high regulatory compliance; the advent of crypto futures trading, and attempts to gain broad acceptance for crypto-based ETFs.