18 Oct 2022

One global dollar trade: Correlations stay at extreme levels

Correlations remain high across assets, and the dollar seems to be the source leading it all, as BTC’s DXY correlation has reached levels not seen since the covid crash in March 2020. Are we nearing the peak of cross-asset correlations?
Source: Tradingview
Last week’s CPI surprise caused yet another joint market movement across a various range of asset classes, as the market repriced the Nov 2nd FOMC hiking expectations. The 30-day correlation between BTC and U.S. equities has stabilized at around 0.7 in the last five weeks. Back in April and May, correlations trailed at similar highs for 6 consecutive weeks until the tight correlation softened slightly amid the crypto contagion period.
Source: Tradingview
BTC’s correlation to gold sits at multi-year highs, suggesting that the flight toward the dollar is widening its reach. All in all, correlations are pushed towards unusual extremes in both directions as BTC’s 30-day correlation to DXY has declined to -0.64. BTC’s 30-day correlation to the DXY has only been lower on 9 occasions since 2017. All occurrences happened in the summer of 2020, following the covid crash. In essence, the dollar flow seems to be the one source leading the global markets, and BTC is heavily impacted, with correlations reigning unusually extreme. Is this the correlation 1 moment?
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