Even with the drop in crypto prices, the development of digital assets is still very high. 

Morgan Stanley has said in a report that cryptos have been trading like risk assets because of the stimulus coming from central banks and governments. However, tighter Federal Reserve policy has seen the reversal of liquidity-driven cryptocurrency momentum.

The rise in the market capitalization of Bitcoin has followed the rising trend of the global M2 money supply, the report indicated. At the beginning of 2020, crypto market capitalization grew ten times because of monetary easing by central banks. Now, the crypto market cap has dropped from a peak of USD 2.92 trillion in 2021 to USD 2 trillion. 

New Cryptos Hit the Market, Bitcoin Price Traces Stocks 

Even with this drop in crypto prices, the creation of new cryptos is still on and fast. An analyst from Morgan Stanly said that in the past week, over 100 new cryptos have hit the market, especially on decentralized exchanges. The growth of decentralized finance (DeFi) has traced that of the Ether prices on the market. 

DeFi is a collective term used in trading, lending, and other financial activities on blockchain without using intermediaries. Morgan Stanley established that trading has weakened in the crypto bear market, with exchanges handling about USD 750 billion in March 2022, which is about half the volume reported in November 2021. 

Bitcoin’s price has demonstrated a strong correlation to equities starting from the start of 2020, but almost none with gold. The report indicated that cryptos are also strongly correlated with entertainment and media stocks in the United States because they are probably driven by the same factors.