Goldman Sachs analysts say that the mainstream adoption of cryptocurrencies causes a correlation with other financial instruments that affect diversification benefits.
BTCUSD is down-0.86%, GS: NYSE is down -0.98% on premarket
Analysts led by Zack Pandl notes that bitcoin is positively correlated with inflation hedge assets and technology stocks. It adds that the digital asset is negatively correlated to the real interest rate and the USD.
The bank observes that the recent plunge in Bitcoin was linked to the correction in the tech stocks triggered by the anticipated Federal Reserve interest rate hike.
The drop caused a domino effect in altcoins and reduced borrowing and lending activities in the DeFi networks, where the asset is used as collateral.
Goldman says that projects like metaverse may sustain the assets in market volatilities but may not hold against macroeconomic variables.
The analysts maintain that the 40% crypto market plunge since November was caused mainly by macroeconomic factors.