Crypto is no longer an obscure asset class within the financial ecosystem, but a growing correlation with the stock market undercuts the “investment hedge” role of Bitcoin (BTC) and other cryptocurrencies, according to a new International Monetary Fund (IMF) research.

A blog post accompanying the survey highlights new risks associated with the growing interconnectedness between digital assets and financial markets. Penned by IMF Monetary and Capital Markets Department director Tobias Adrian and economist Tara Iyer as well as research deputy division chief Mahvash Qureshi, the article claims that the increasing correlation between crypto assets and stocks “limits their perceived risk diversification benefits and raises the risk of contagion across financial markets.”

“Crypto assets such as Bitcoin have matured from an obscure asset class with few users to an integral part of the digital asset revolution,” the article reads, adding that this transition comes along with financial stability concerns.

Noting that BTC and Ether (ETH) rarely correlated with major stock indexes before the pandemic, the authors agreed that crypto assets helped diversify risk for investors by acting as a hedge against swings in other asset classes. “But this changed after the extraordinary central bank crisis responses of early 2020,” the authors wrote, adding that crypto and stocks surged hand in hand as investors’ risk appetite grew.

The correlation coefficient between BTC and the S&P 500 has jumped…