Deciphering Crypto Macro Correlations, S&P Global Highlights Volatility

The report from S&P Global attempts to uncover some of crypto’s biggest macro drivers


valerii eidlin/Shutterstock, modified by Blockworks


Digital assets are sometimes hailed as a unique asset class that moves independently of others, but analysis from S&P Global suggests crypto is not insulated from broader economic influences.

Of those macroeconomic factors, the impact of global market volatility was most pronounced.

In its report, titled “Are crypto markets correlated with macroeconomic factors?” and published this month, the firm tries to address some of the industry’s biggest themes, such as whether crypto can serve as a hedge against inflation and the impact of the strength or weakness of the US dollar.

It also attempts to address the potential for financial stresses and market volatility to spill over into the industry, as well as the impact of monetary policy.

Traditional financial stress and market volatility

The study found a correlation between increased financial stress, market volatility and declining crypto prices. This suggests a potential contagion risk, where upheavals in traditional finance could spill over into the crypto market.

S&P pointed toward two major macroeconomic impacts on digital assets including when the World Health Organization declared COVID-19 a global pandemic in March 2020. 

Around that time, on March 12, bitcoin shed an incredible 39% — one of the worst single-day losses in the asset’s history.

Other incidents have also highlighted the contagion risks from traditional finance. That included this year’s banking crisis, when the failure of SVB briefly forced two major stablecoins USDC and DAI to depeg roughly 13%.

Crypto prices have been found to have an inverse relationship with the VIX and OVX indexes, both used as a measure for volatility, suggesting that as market fear and volatility increase, crypto prices tend to fall.

Though, as current macroeconomic factors trends take shape, not all agree on their significance.

“Bitcoin’s price is showing resilience amid ongoing economic uncertainty, remaining strong and steady even with open questions around the debt ceiling, inflation, and upcoming interest rate decisions,” Alex Adelman, CEO and co-founder of Lolli told Blockworks via email.

The robust price trends exhibited by bitcoin reveal that investors persistently favor it as an independent asset, he said. Despite macroeconomic fluctuations, the asset has consistently upheld its value, reinforcing its appeal among investors, according to Adelman.

Others have argued that banking sector stress, specifically, may be a tailwind for crypto. 

Monetary and fiscal policy impacts

In its research, S&P found the impact of monetary policy on crypto can also be significant. Expansionary monetary and fiscal policies that increase disposable income can boost investment in “risk on” assets like crypto. 

Conversely, the prospect of tighter monetary policy, such as interest rate hikes, can increase financial stress and market volatility which, in turn, can send digital assets falling.

Unprecedented levels of monetary easing by central banks globally since 2008/09 have inflated the money supply to record levels, which have typically moved in tandem with bitcoin’s price.

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