Increased and growing awareness from retail and institutional investors since 2017 created market movements that, at first appearance, seem to suggest that cryptocurrency and equities markets are correlated. However, it isn't so much a correlation as it is an indication of how cryptocurrency is being treated by the market that gives it this appearance.
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It is possible that because investors appear to be treating cryptocurrency like stocks, digital assets can react to market influencers just like equities do. For example, on May 4, 2022, the Federal Reserve announced that it was increasing its target federal funds range to 0.75%–1%. On May 5, 2022, Bitcoin fell to around $31,000. The Nasdaq 100 (NDX) lost about 1,400 points, and SPX lost about 150 points. The cryptocurrency price was much more pronounced, but the effect was the same.
It is also likely that investors, as a whole, are treating cryptocurrency the way they treat equities temporarily. Cryptocurrencies are still in their price discovery phase, where the market is determining the role they will play. When they were first introduced, investors paid them no attention.
What this means is that investors should approach cryptocurrency cautiously. It is difficult to tell how the market and prices will act in the future. Bitcoin and other cryptocurrencies could remain correlated to equities, or they might not. ...