Prospect Capital Corp
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Financials : Capital Markets | Small Cap Blend
Company profile

Prospect Capital Corporation is a financial services company that primarily lends to and invests in middle-market privately held companies. The Company's investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. It invests primarily in senior and subordinated secured debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. It makes directly originated agented loans to companies, including companies which are controlled by private equity sponsors and companies that are not controlled by private equity sponsors. It also invests in senior and secured loans, syndicated loans and high yield bonds that have been sold to a club or syndicate of buyers, both in the primary and secondary markets. The Company is managed by its investment adviser, Prospect Capital Management L.P.

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Bitcoin is trading in tandem with stocks? This chart shows that relationship as markets face a more hawkish Fed

6:36 pm ET January 11, 2022 (MarketWatch)

By Frances Yue

Bitcoin and the S&P 500 aren't necessarily supposed to both skid at the same time

The argument has long existed -- some bitcoin supporters have touted the cryptocurrency as "digital gold," a hedge against inflation and a store of value.

But others point out that bitcoin lately has been trading in tandemwith sentiment around the stock market, especially during the past few months, as investors adjust to the Federal Reserve's plans to tighten financial conditions for the first time in nearly two years, and sooner than previously expected.

As evidence of that trend, the 100-day correlation between bitcoin and stocks represented by the S&P 500 , reached about 0.49 on Tuesday, the highest level since July 2020, according to Dow Jones Market data.

What's more, the 60-day correlation between bitcoin and S&P 500 reached 0.54, the highest since at least 2010, the early days of the cryptocurrency.

Correlation, which refers to the extent to which different assets are trading in relation to each other, ranges in magnitude from -1.00 to 1.00. A positive correlation means assets have been moving in the same direction, while a negative correlation means they moved in the opposite direction.

The larger the absolute value of the coefficient, the stronger the relationship. This chart shows that bitcoin maintained a positive correlation with the S&P and the Nasdaq Composite since February 2020, respectively, meaning that the assets have been moving generally in the same direction. It also shows an upward trend in bitcoin's correlation with both the S&P 500 and the Nasdaq Composite since August 2021.

Specifically, the 100-day correlation between bitcoin and tech stocks represented by the Nasdaq Composite reached a local high of around 0.47 on Friday, the highest level since October 2020.

The rate-sensitive Nasdaq tumbled in a rough start to the year, ending the first week three percentage points away from correction territory, before recouping significant lost ground on Monday and Tuesday.

Since early 2021, the correlation coefficient between bitcoin and the S&P 500 or the Nasdaq Composite has been much higher than between bitcoin and gold, which has been traditionally seen as a hedge against inflation. Bitcoin and gold, however, had a negative correlation during several periods.

"Towards the second half or end of last year, I think bitcoin really got caught up with the macro environment," Jason Lau, chief operating officer at crypto exchange OkCoin said. "News about the Fed, news about COVID, news about whatever ... especially with the inflation expectations, really fed into sort of that narrative."

As bitcoin traded lower from its November high, crypto mining stocks posted even larger losses. According to crypto data analytics firm Arcane Research, its market-cap weighted index, consisting of 15 of the biggest publicly-traded bitcoin mining companies, is down almost 50%, in contrast with the 38% decline of bitcoin since Nov. 10, when bitcoin reached an all-time high.

Mining stocks tend to outperform bitcoin in bull cycles and underperform bitcoin when trading in a downward trend, Arcane research noted in a Tuesday report.

With U.S. stocks ended higher on Tuesday, bitcoin also rebounded from Monday losses, trading at around $42,873, up 2.8% over the past 24 hours. Ether gained 5.6% to about $3,242. Bitcoin mining company Marathon Digital Holdings (MARA) closed 2.2% higher on Tuesday at around $29.58. Crypto mining equipment company Ebang International (EBON) logged a 9.6% gain at around $1.03.

The Dow Jones Industrial Average finished up 183 points Tuesday, or 0.5%, at around 36,252. The S&P 500 ended 0.9% higher, while the Nasdaq Composite booked a 1.4% gain.

Read more:Nasdaq leads stocks higher as investors take Powell testimony in stride

Listen to: How crypto is making us rethink money

--Ken Jimenez contributed to this article

-Frances Yue


(END) Dow Jones Newswires

January 11, 2022 18:36 ET (23:36 GMT)

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