1Business Analyst, Societe Generale, Sri Venkateswara College, University of Delhi, Delhi
2Assistant Professor, Department of Commerce, Sri Venkateswara College, University of Delhi, Delhi
Online Published on 16 January, 2023.
Blockchain is used by different industries like banking, healthcare, law enforcement, IOT, online music, digital transfer, and real estate for transaction security purposes. Blockchain is becoming more sustainable day by day. The objective of this study is to determine the interdependence of major stock market indices and cryptocurrencies, offering investors a potential path for diversification.
A quantitative study will investigate the interdependency of cryptocurrencies on different stock market indices. These are selected on the basis of high market capitalization. The research will be based on secondary data collection.
Strong correlation between crypto and stocks has been seen in developing or emerging market nations, which have been at the forefront of crypto development and adoption. In 2020–21, for example, the correlation between returns of the MSCI emerging markets index and Bitcoin was 0.34, increased 17-fold from the previous years. Stronger correlation indicates that Bitcoin is becoming a risky investment. Its correlation with stocks has risen above than that with other assets such as gold, investment grade bonds, and major currencies, indicating that risk diversification benefits are limited, contrary to prior beliefs.
Increased crypto-stock interconnectedness increases the risks of spillover of investor sentiment spillovers between asset classes. As a result, a severe drop in Bitcoin prices may encourage investor risk aversion, resulting in a drop in stock market investment. Spillovers from the S&P 500 to Bitcoin are on average of equal magnitude, implying that sentiment in one market is passed.
Stock Market, Cryptocurrencies, Blockchain, Investors, Volatility, Crypto-Stock Interconnectedness
