Stock-Crypto Correlation Likely to Fade in the Future, According to Citi

Citi Predicts Weaker Correlation Between Crypto and Stocks as Digital Assets Mature

Citi (C), in a new research note, forecasts a weakening relationship between the stock market and cryptocurrencies as the latter continue to grow and evolve.

Historically, the movements of equities have had a significant impact on crypto markets. However, Citi’s analysts believe this correlation will diminish over time as digital assets mature, technological advancements are made, and institutional adoption increases.

Despite the speculative nature of cryptocurrencies, which tends to amplify correlations during risk-off periods, the bank expects the crypto market to develop more independently.

Citi’s analysts, led by Alex Saunders, also highlighted that as the regulatory landscape in the U.S. becomes clearer, cryptocurrencies are likely to experience more idiosyncratic price movements, moving away from traditional financial drivers.

As for Bitcoin (BTC), Citi believes its volatility will decrease as institutional interest grows. Additionally, the report pointed out that in 2024, crypto was the only asset class whose market cap, as a percentage of U.S. equities, actually increased.

Citi also noted Bitcoin’s emerging relationship with gold, suggesting it could be an early indicator of BTC’s growing appeal as a “store of value.”