Bitcoin became increasingly correlated with equities toward the end of the 4Q of last year, and fell when faced with the prospect of central bank tightening, FSInsight said in a note entitled “Digital Assets in a Post-Cycle World.”
The correlation has become more pronounced with bitcoin and the wider crypto market now being strongly correlated with technology stocks due to “legacy market capital entering the fold,” Sean Farrell, head of digital asset strategy, wrote in the note on Friday.
However, bitcoin is still king, Farrell wrote, adding that the crypto could reach $200,000 in the second half of the year, following a choppy start to 2022.
FSInsight also said that decentralized finance (DeFi), non-fungible-tokens (NFTs) and other Web 3 applications have driven massive growth of the ethereum network.
Ethereum is undervalued relative to cloud platforms, and ether could reach $12,000 in 2022, the report said.
There is optimism surrounding its transition to proof of stake in 2022, which if it happens, would likely result in capital inflows irrespective of bitcoin performance, the note added.
Bitcoin was trading at $42,750, ether at $3068 as of publication time.
CORRECTION (Feb 7, 13:40 UTC): Corrects headline to say $200,000 not $20,000.