Correlation Between Stocks and Crypto Expected to Diminish Over Time, Citi Reports

Citi: Crypto-Equities Correlation Expected to Weaken as Digital Assets Evolve

Bitcoin’s connection to the stock market is likely to fade over time as the cryptocurrency sector matures and adoption accelerates, according to a research report from Citi (C) released Monday.

While equities have historically played a major role in driving crypto price movements, the bank’s analysts predict that the link between the two markets will weaken as the industry expands, institutional participation increases, and blockchain technology advances.

However, Citi cautioned that crypto’s speculative nature still leaves it susceptible to periods of heightened correlation with risk assets, especially during broader market downturns.

“A more defined regulatory landscape in the U.S. will likely lead to greater price independence in digital assets,” wrote lead analyst Alex Saunders.

Citi also noted that Bitcoin’s long-term volatility is expected to decline as institutional adoption grows. Interestingly, crypto was the only asset class that increased in market cap relative to U.S. equities last year.

The report also pointed to Bitcoin’s rising correlation with gold as a potential sign of its evolving role as a “store of value” asset in global markets.