What is the correlation between carry trade interest rates and the volatility of cryptocurrencies?

1 answers

• Nov 27, 2021 · 3 years ago
  Indeed, there is a correlation between carry trade interest rates and the volatility of cryptocurrencies. When interest rates in the low-interest-rate currency are low, investors tend to borrow money and invest in higher-yielding assets, such as cryptocurrencies. This increased investment can contribute to the volatility of cryptocurrencies, as the demand and price fluctuate. Conversely, when interest rates in the low-interest-rate currency rise, investors may be less motivated to engage in carry trades and invest in riskier assets, which can lead to decreased volatility for cryptocurrencies.
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