Rating provider S&P Global has examined whether or not there is a relationship between crypto assets and macroeconomics in a new report. Its conclusion is a firm “maybe” and the details are complex, mainly due to “idiosyncratic events” such as the crypto winter, geography and the industry’s short history.
Crypto assets have a different value proposition than traditional assets and different performance drivers, the S&P report noted in its introductory paragraphs, but the interconnectedness of the crypto ecosystem and macroeconomics is inescapable. The S&P analysts compared the S&P Cryptocurrency Broad Digital Market Index (BDMI) with other financial indicators to assess the extent of that interconnection in five areas.
“Crypto assets are not exempt from the effect of macroeconomic changes,” the report said, but the role idiosyncrasy plays in crypto economics is significant. For example:
“In general, crypto markets have performed well in periods of expansionary monetary policies, although we are not able to establish a causal relationship. Some of the large swings in crypto currencies have taken place following factors that are not directly related to monetary policy, such as the FTX collapse.”
On a daily rolling three-month basis interest rates and the #crypto index have exhibited an inverse relationship 63% of the time since May 2017. This increases to 75% from May 2020, following the start of the COVID-19 pandemic.
Read the latest research: https://t.co/WH4cWUOUiT pic.twitter.com/FAJ06RSwZH
— S&P Global (@SPGlobal) May 10, 2023
Crypto’s relation to recessionary expectations is also highly specific, although the variables differ. In this case, the user’s l
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Author: Derek Andersen
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