When Bitcoin Sneezes: How Crypto and Stocks Caught the Same Cold

Source: PortaldoBitcoin Original Title: When Bitcoin Sneezes: How Crypto and Stocks Caught the Same Cold | Opinion Original Link: Not long ago, Bitcoin was touted as the ultimate diversifier — an asset supposedly immune to whatever was happening in the stock markets. Early academic papers backed this idea: Liu and Tsyvinski (2021) showed that major cryptocurrencies had minimal exposure to standard equity, bond, and FX risk factors, and that their returns were mostly driven by crypto-market-specific forces such as momentum and investor attention, not by stock markets.

Fast forward to recent years, and the story now looks very different. A growing body of literature shows that crypto and stocks are tightly intertwined, especially during periods of stress. For a fintech audience, the key message is simple: you can no longer treat crypto as an “off-system” risk. It increasingly behaves like a high-beta tech sector — with some additional extreme behaviors.

From “Uncorrelated” to “Just Another Risky Asset”

A recent review by Adelopo et al. (2025) examines the evidence on how cryptocurrencies interact with traditional financial markets. They document clear, time-varying, nonlinear links between crypto and stock markets, with particularly strong connections during major macro and geopolitical events, such as COVID-19 or the Russia–Ukraine war.

Studies focused specifically on tech stocks and blockchain-linked companies confirm this. Umar et al. (2021) find strong interconnectedness between crypto markets and the tech sector, while Frankovic (2022) shows that Australian “crypto-linked” companies experience significant return impacts from crypto prices, especially for firms more involved in blockchain activities. In other words, listed stocks have become a transmission channel for crypto risk.

What the Latest Evidence Shows

Several recent studies make the “crypto ↔ stocks” link explicit:

• Global Spillovers: Vuković (2025) uses a Bayesian Global VAR Model to show that adverse shocks originating in the crypto market depress stock markets, bond indexes, FX rates, and volatility indexes in multiple countries — not just the US.
• Stock–Crypto Co-movement: Ghorbel and coauthors (2024) study the connection between major cryptocurrencies, G7 equity indexes, and gold. They find that cryptocurrencies have become major emitters and receivers of shocks, with stronger ties to stocks in recent years and especially during turbulent periods.
• US and China Stock Markets: Lamine et al. (2024) analyze spillovers between US/China stocks, cryptocurrencies, and gold. They identify significant dynamic spillovers from crypto to these stock markets, again concentrated in episodes of high volatility.
• Exchange-Level Contagion: Sajeev et al. (2022) document a contagion effect from Bitcoin on major stock exchanges (NSE India, Shanghai, London, and Dow Jones), using volatility and correlation analyses from 2017–2021.

International organizations tell the same story. An IMF paper on “Spillovers Between Crypto and Equity Markets” finds that Bitcoin shocks can explain a non-trivial share (approx. half a dozen percent up to the double-digit range) of variation in global equity volatility — and that this influence has increased over time as institutional and derivatives markets have matured.

The common conclusion: crypto is now firmly embedded in the global risk ecosystem.

Why Tech and Crypto Now Move Together

Why does Bitcoin now look so much like a high-beta tech stock?

• Duration and Interest Rate Sensitivity: Both crypto and growth stocks are essentially bets on uncertain future cash flows or network value. When real rates rise, higher discounting hurts — and both sectors fall together.
• Investor Base and Leverage: Retail trading, momentum strategies, and derivatives are widely used in both markets. Products like futures, options, and leveraged ETFs allow shocks in one market to be amplified and replicated in the other.
• Institutional Portfolio Construction: As crypto has been added to multi-asset and hedge fund portfolios, its returns have inevitably become intertwined with traditional cross-asset positioning. When funds de-risk, everything in the “risky bucket” gets sold together.

What This Means for Portfolios and Risk Management

For portfolio construction, the message is uncomfortable but clear:

• Crypto still diversifies in quiet periods — correlations can remain moderate in benign conditions.
• But during stress, when diversification is most valuable, correlations and spillovers spike.
• Bitcoin and major altcoins behave less like “digital gold” and more like leveraged proxies for global risk sentiment.

This does not make crypto useless as an investment — but it means that treating a 5–10% crypto allocation as “uncorrelated upside” is no longer defensible based on the data.

Looking ahead, an open question for academics and practitioners is whether spot ETFs and broader institutional adoption will further tighten these links, or whether a new use case (such as real adoption for payments or settlement) could reintroduce more idiosyncratic factors.

For now, the evidence points in one direction: when global markets catch a cold, crypto is not left out — it coughs along with everyone else.