While crypto and equity markets have shown a correlation, JPMorgan analysts examined which equity sectors are most linked to crypto. Their findings indicate that bitcoin has the highest correlation with small-cap tech stocks, as measured by the Russell 2000 tech sector.

"This is true with both bitcoin and altcoins (i.e., crypto ex-bitcoin), although the correlation is on average higher with the former," JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report on Wednesday. "The fact that crypto is more correlated with smaller rather than the largest tech stocks makes sense due to the crypto reliance on VC and due to blockchain/crypto technological innovation typically being the focus of smaller rather than the largest tech companies."

The Russell 2000 Index is a U.S. stock market index that tracks the smallest 2,000 stocks within the broader Russell 3000 Index.

JPMorgan analysts revisited the crypto-equity market correlation topic following Monday's simultaneous correction of U.S. tech stocks and cryptocurrencies. According to the analysts, the crypto-equity correlation has remained structurally positive since the pandemic due to two factors: the role of retail investors, who have access to leverage in both markets and the tech-driven nature of both sectors.

JPMorgan's analysis shows that this correlation fluctuates over time and tends to peak when the tech sector experiences major shifts. In years when tech outperformed, such as 2020 and 2024, or faced sell-offs, like in 2022, bitcoin's correlation with equities became more pronounced, the analysts said.

"This pattern supports the idea that crypto is fundamentally linked to tech and when the tech sector is subjected to a more significant reassessment by equity investors," according to the analysts.

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