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Cryptocurrencies Trade in Sync After FTX Collapse – Just Not With Stocks
A new analysis shows how correlations have increased on various sectors of the 162-asset CoinDesk Market Index (CMI) amid widespread crypto distress following the collapse of Sam Bankman-Fried's FTX exchange. U.S. stocks, meanwhile, look unfazed by it all.
They say that all correlations go to one during a financial crisis.
What's noteworthy about the most recent crash in crypto markets – triggered by the collapse of Sam Bankman-Fried's FTX exchange and his trading firm Alameda Research – is just how divergent the narrative was from traditional markets. That's noteworthy, since bitcoin (BTC), the largest cryptocurrency, was largely trading in sync with U.S. stocks as recently as September.
STORY CONTINUES BELOW
The market contagion from FTX spread rapidly in crypto, sending the 162-asset CoinDesk Market Index (CMI) down about 18% so far in November.
And despite widespread headlines about the FTX-inflicted turmoil across traditional financial media, U.S. stocks were mostly unfazed – trading higher based on softer-than-expected inflation readings that inspired investor hopes of a less threatening monetary-tightening campaign by the Federal Reserve.
The Standard & Poor's 500 Index is up 3.1% on the month.
An analysis of CMI and its six sector indexes shows how correlations surged among the various digital assets from Nov. 7 to Nov. 11.
The crypto market went into "a highly correlated state after the FTX collapse," said Jodie Gunzberg, managing director of CoinDesk Indices. "The event was (and still probably is) so powerful that it is driving the entire asset class together."
Bradley Keoun
Bradley Keoun is CoinDesk's managing editor of tech & protocols, where he oversees a team of reporters covering blockchain technology, and previously ran the global crypto markets team. A two-time Loeb Awards finalist, he previously was chief global finance and economic correspondent for TheStreet and before that worked as an editor and reporter for Bloomberg News in New York and Mexico City, reporting on Wall Street, emerging markets and the energy industry. He started out as a police-beat reporter for the Gainesville Sun in Florida and later worked as a general-assignment reporter for the Chicago Tribune. Originally from Fort Wayne, Indiana, he double-majored in electrical engineering and classical studies as an undergraduate at Duke University and later obtained a master's in journalism from the University of Florida. He is currently based in Austin, Texas, and in his spare time plays guitar, sings in a choir and hikes in the Texas Hill Country. He owns less than $1,000 each of several cryptocurrencies.
