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Bitcoin is still a great way to diversify portfolio even if it trades like a tech stock, analyst says

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BTC's rolling 90-day correlation with equity indices (NYDIG)

Bitcoin’s recent tendency to move in step with U.S. equities does not erase its value as a portfolio diversifier.

That’s according to financial services and infrastructure firm NYDIG. In a weekly market note, Greg Cipolaro, the company’s global head of research, said correlations between bitcoin and stock benchmarks such as the S&P 500, the Nasdaq 100, and the software-heavy IGV ETF have risen in recent months.

The shift has led some market watchers to argue that the cryptocurrency now trades like a proxy for technology stocks. But Cipolaro disputes that view.

BTC's rolling 90-day correlation with equity indices (NYDIG)

Even with correlations near 0.5, equities explain only a small share of bitcoin’s movements, Cipolaro wrote. Statistically, that level means roughly one quarter of price changes are driven by stock market factors, leaving the remaining three quarters tied to forces unique to the crypto market.

Those forces include capital flows into bitcoin funds, shifts in derivatives positioning, network adoption trends and regulatory developments.

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Cipolaro said recent price alignment likely reflects the current macro backdrop rather than a structural merger between asset classes. Both bitcoin and growth stocks respond to liquidity conditions and investor appetite for risk.

“That differentiation supports bitcoin’s role as a portfolio diversifier,” Cipolaro wrote. “While cross-asset correlations with equities are currently elevated, they remain far from determinative of bitcoin’s returns.”

Bitcoin’s evolving role

NYDIG’s note also touched on recent comments from prominent investors. Chamath Palihapitiya and Ray Dalio have sparked debate over whether early advocates have turned on the asset. Cipolaro argued instead that the debate has shifted, from whether bitcoin could survive to whether it could serve as a reserve asset for central banks.

Palihapitiya, an early supporter who back in 2013 called bitcoin “Gold 2.0,” recently questioned whether the asset fits the needs of sovereign balance sheets.

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Dalio has raised similar concerns for years, pointing to volatility, regulatory risk and long-term technological threats such as advances in quantum computing.

Cipolaro said these critiques reflect changing expectations as bitcoin moves from a retail-driven asset to one held by institutions. Even so, he argued that bitcoin’s long-term growth does not depend on central bank adoption.

Instead, the network has expanded from individual users to family offices, asset managers, and exchange-traded funds, a path that differs from many past financial innovations, which began with institutional capital.

Central bank ownership may ultimately validate the asset class further, but it is not a prerequisite for continued growth,” Cipolaro wrote. “

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“​Bitcoin’s value comes from its globally distributed network, political neutrality, and technical and economic properties that enable censorship-resistant value transfer, digital scarcity, and independent operation free from any single government, institution, or monetary authority,” the note concluded.

Read more: Crypto bulls slam Ray Dalio’s ‘tired narratives’ in defense of bitcoin’s future

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Crypto World

Kalshi Suffers Court Loss in Ohio over Sports Betting Lawsuit

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Law, CFTC, Court, Kalshi, Prediction Markets

The prediction markets platform argued for an injunction against Ohio authorities, claiming that federal commodities laws superseded state laws on sport event contracts.

An Ohio federal court has denied a motion filed by prediction markets platform Kalshi for a preliminary injunction against Ohio state authorities over allegations that the company was operating in violation of gambling laws.

In an order filed Monday, US District Court for the Southern District of Ohio Chief Judge Sarah Morrison denied Kalshi’s request for an injunction that would have blocked the Ohio Casino Control Commission and state attorney general from regulating contracts on the platform, specifically for sports betting.

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According to the judge, Kalshi had failed to show that the sports event contracts available on the platform were subject to the “exclusive jurisdiction” of the Commodity Futures Trading Commission (CFTC).

“Even if this Court were to find that sports-event contracts are swaps subject to the CFTC’s exclusive jurisdiction, Kalshi has not shown that the [Commodity Exchange Act, or CEA] would necessarily preempt Ohio’s sports gambling laws,” said the opinion and order, adding:

“Kalshi argues that Ohio’s sports gambling laws are field and conflict preempted by the CEA when it comes to sports-event contracts traded on its exchange […] Kalshi fails to establish that Congress intended the CEA to preempt state laws on sports gambling.”

Law, CFTC, Court, Kalshi, Prediction Markets
Source: Courtlistener

The denial pushed back against the narrative from CFTC Chair Michael Selig, who said in February that the federal regulator had “exclusive jurisdiction” over prediction markets and threatened lawsuits against any authority claiming otherwise. Kalshi and prediction platforms face lawsuits in other US states over similar allegations involving unlicensed sports betting.

“This Court does not endeavor to explain why the CFTC has not exercised its authority […] with respect to the sports-event contracts,” said the Monday filing in Ohio. “But the agency’s inaction is not proof that the sports-event contracts are regulated by or permissible under the CEA—and the Court has concluded they are not.”

Related: CFTC chair backs blockchain-based prediction markets as ‘truth machines’

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In a statement to Cointelegraph, a Kalshi spokesperson said that the company “respectfully disagree[d] with the Court’s decision, which splits from a decision from a federal court in Tennessee just a few weeks ago, and will promptly seek an appeal.”

CFTC guidance on prediction markets could be looming

Last week, Selig said that the federal regulator was working to provide guidance regarding prediction markets “in the very near future.” The CFTC chair is the sole Senate-confirmed commissioner in a panel normally consisting of five people.

Magazine: The debate over Bitcoin’s four-year cycle is over: Benjamin Cowen

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