Crypto currencies continue to bottom out, as 2022 marches on, and we're only a few days into the new year. 

Show me the correlation:

Bitcoin, the world’s most valuable crypto currency by market value, dropped 8% to trade around $35,000. Bitcoin had previously hit a record high of $69,000 in November. Meantime, Ether, the second-largest crypto currency by market cap, sank nearly 10% to trade in $2,400 territory. 

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While, the crypto currencies were taking a nose dive, so was the over all stock market. 

The Nasdaq, home to many of the biggest tech firms, dropped ~10% below a record set in November, indicating a technical correction. Right around the same timeframe, Dow Jones Industrial Average (DJIA) fell 313.26, closing below its 200-day moving average since December 2021. The S&P 500 fell 1.1% and closed below 4,500 for the first time since October 2021.

These correlation have led some analysts to speculate that Crypto currencies are now showing a strong, positive correlation with the stock market. According to Joanna Ossinger report on Yahoo Finance:

The 40-day correlation coefficient for the digital token and the tech-heavy Nasdaq 100 has reached almost 0.66, the most in data compiled by Bloomberg since 2010. A similar correlation with the S&P 500 is at a record too.

Why do investors flock to crypto currencies?

There are varying set of reasons, though the most common and often cited by institutional investors, is that crypto currency is used to hedge against inflation. Secondarily, it's used as a lever to gain higher returns on an investment class that is not dependent on the movements of the stock market. 

According to Wharton professor Jeremy Siegel, "Let's face the fact, I think bitcoin as an inflation hedge in the minds of many of the younger investors has replaced gold," he told CNBC. "Digital coins are the new gold for the millennials."

What does this all mean for main stream?

Crypto currencies are here to stay, as this asset class has a strong footing in developing countries, due to fears of local fiat devaluation and inflation. In the developed world, gold is usually the go to commodity to hedge against inflation. 

Technical analyst Katie Stockton of Fairlead Strategies has suggested that, "The correlation between bitcoin and high-growth benchmark ARKK still stands at ~60% year-to-date, versus ~14% for the price of gold, reminding us to categorize bitcoin and altcoins as risk assets rather than safe havens,". 

Whilst gold has been around for ions, bitcoin just turned 13. This simply implies that when it comes to crypto currencies, the technology is still maturing. With complimentary technologies such as NFT's and Metaverse starting to take a strong foothold, digital or crypto currencies will become their enablers.