With Loss of Industry Domination, Bitcoin's Market Correlations Will Disappear

Bitcoin (BTC) is underperforming its rivals in a worsening macroeconomic and political environment. While inflation is surging, the war in Ukraine is causing concern about a recession, and global currency movements are volatile, Bitcoin is weakening relative to Ether (ETH). Despite harsh macroeconomic conditions, Bitcoin is still not resilient like gold, as a store of value should be.

Bitcoin's dominance in the overall crypto ecosystem is declining due to Ether's growth, stablecoins, and alternate layer one blockchains. The underlying infrastructure of blockchain is built on layer one networks. As a result, cryptocurrencies are more of a structural trend than a macroeconomic asset class. The postCOVID-19 era has seen bitcoin's correlation with the stock market increase, preventing it from acting as an inflation hedge. According to a recent industry report, capital flows into cryptocurrencies increased in response to monetary policy easing, and now that the market is tightening up, capital inflows have reversed. It is expected that Bitcoin will remain a macro-driven crypto asset, while the rest will remain technology and innovation-driven. As BTC currently dominates the total crypto market cap in time, as interest in Bitcoin decreases, the correlation between BTC and other tokens will also decrease and eventually disappear. —Crypto Weekly