DBS Group of Singapore said that the explosive volatility of Bitcoin will increase the volatility of US stock futures on unusual trading days.
DBS chief economist Taimur Baig and macro strategist Chang Wei Liang concluded in a study that the world's largest cryptocurrency is no longer a marginal asset class and that S & P 500 contracts tend to fluctuate sharply after Bitcoin soars or falls 10 per cent within an hour.
They analyzed four such trading days: December 28, January 4, January 29 and May 19, in which bitcoin fluctuated extremely and compared it with S & P 500 futures. The study shows that after significant fluctuations in Bitcoin, the positive correlation between the cryptocurrency and the S & P 500 is 0.26, but under normal circumstances it is 0.19.
The correlation between the two assets remains weak, but DBS said it also found that returns in S & P 500 futures over the past few days were 42 per cent higher than normal.
'This suggests that in a short period of time, broader stock market sentiment may be more closely linked to sentiment in the Bitcoin market, 'they wrote. Given the recent pressure on Bitcoin, it may be wise for market participants to keep a close eye on developments in this area.
Bitcoin rose 6% on Wednesday, trading close to $40000. The price is above last week's low of about $30000, but well below the record high of nearly $65000 set in mid-April.