Are Institutional Investments Fueling Correlation Between Crypto and Stock Markets?
Interest rate hikes and runaway inflation has continued to engulf the investment scene, given that the global economy finds itself on rocky grounds based on factors like the invasion of Ukraine by Russia.
To tame rising inflation, various governments have resorted to increasing interest rates, which have had detrimental effects on the financial markets. For example, the Federal Reserve (Fed) raisedthe interest rate by 75 basis points (bps) earlier this month, a scenario that was last seen in 1994.
Traditionally, institutional investors were heavily inclined toward stocks in the financial scene, but they have spread their wings to include crypto in their portfolios.
With macroeconomic factors like interest rate hikes affecting both stocks and crypto, this begs the question: are institutional investments propelling the correlation between the two markets?
What triggered institutional investors to enter the crypto scene?
With the onset of the coronavirus (Covid-19) pandemic in early 2020, global economic turmoil emerged based on massive layoffs as social distancing and travel restrictions took effect.
As a result, governments like that of the United States adopted financial initiatives like quantitative easing or printing more money to caution their citizens against the economic effects triggered by the pandemic. For instance, the American administration printedmore than $6 trillion for this purpose.
As many investors faced an uncertain future, cryptocurrencies emerged as a leading alternative to fill the void as hedges against inflation in the long term, and institutional investors were not left behind. Therefore, before the onset of the pandemic, institutional investors' presence in the crypto space was not felt as
Read more on blockchain.news
