Binance CEO CZ Explains Why Stock Market Affects Crypto Market.
Currently, the stock market is quite closely related to the crypto market. When the stock market does poorly, so does crypto. CEO of Binance, Changpeng Zhao or better know as CZ, explained why this is soon First On CNBC. He also said that he hoped that they should be separate and sees the stock and crypto to decouple soon in the future.
Limited Supply Of Crypto
CZ explained that because of COVID, governments all of the world printed more money to ease the market and by simple logic, inflation would definitely happen. Which this should be different for cryptocurrency due to their limited supply. He believes that big crypto coins like Bitcoin, Ethereum and BNB all have limited supply.
“Cryptocurrencies, the big ones – Bitcoin, BNB coin, Ethereum, they’re limited supply, so their supply didn’t increase. The number of people getting into this industry and the utility, the number of people who need to use those coins have increased. The demand has increased, but today, unfortunately.” said CZ in the interview.
As we know, the Bitcoin supply is limited to 21 million, which means, no more than 21 million Bitcoins can ever be mined or in circulation at any given momeny. This also means that it is deflationary by nature. When the maximum supply is reached, there will be fewer coins available on the market, which in turn create market scarcity and should lead to deflation conditions or 0% inflation rates.
Why Correlation Between Stocks And Crypto
Currently, people who trade in crypto also trade in the stock market. That is one of the reason why the two market is similar in terms of movement. He believes that the two should decouple in the future and explained why the correlation.
“In theory, if we go by supply and demand, there’s a very simple logic to derive from that, but today, many people trading cryptocurrencies are also in the stock market so when the stock market tanks, people want to hold cash and they also sell cryptocurrencies. So today, on the short time frame, it’s kind of coupled, but in theory, they should be decoupled.”
This basically can been seen when the inflation rate is up, the stock market is affected and therefore affects the crypto market.