Crypto Market Holds Strong Amid Weak Stock Market: Citi

Paigambar Mohan Raj
Source: CryptoSlate

According to financial giant Citi, the cryptocurrency markets are holding up well despite a slump in the stock market. As per the firm’s analysts, the correlation between cryptocurrencies and equities has continued to fall since last year.

Citi’s research indicates that although on-chain and search activity have not been as consistent, volumes remain strong. Market caps for stablecoins stabilized after falling after FTX’s demise.

Citi adds that there have been more than $3.5 billion worth of Binance USD (BUSD) outflows since the SEC announced its intention to prosecute Paxos, the company that issued the stablecoin BUSD. The outflows represent a 23% fall in the stablecoin’s market cap.

Moreover, the proportion of ether (ETH) in smart contracts is growing. In terms of ETH, total-value-locked (TVL) activity has not increased as much as prices. Decentralized exchange (DEX) volumes have also remained constant this month following a steady fall.

The bank observes that non-fungible-token (NFT) activity has picked up recently, although transaction volumes are still significantly below average for 2022.

Additionally, despite the year-to-date increase in digital assets, search interest in cryptocurrencies is still minimal, the note continued.

Correlation dropping, good news for cryptocurrency markets?

Citi’s report supports the recent data regarding Bitcoin’s (BTC) correlation to the S&P 500 (SPX). Last week, Bitcoin’s (BTC) correlation to the S&P 500 (SPX) turned negative for the first time since the FTX collapse in November 2022.

The development could mean good news for the asset class. Cryptocurrencies have often been called a hedge against inflation, and a falling correlation might make things easier. If the stock market continues to fall, the digital asset realm may see some relief. However, it is anticipated that the U.S. FED will take a more hawkish stance in its next interest rate hike decision. A negative perception could turn things around for the worse for the cryptocurrency market.