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Bitcoin trends down as to why the stock market could be a bull problem

This year we’ve seen Bitcoin drop to $ 30,000, double to $ 60,000, then hit November’s all-time high above $ 68,000, and rise again around 20% in the same month and has stabilized at around $ 57,000.

Since bitcoin is trending down just like traditional US markets, we may be seeing a correlation. Shares have recently been dragged down by the uncertainty and selling pressure that followed the Fed’s recent announcement, Biden’s bill, and financial fears surrounding the Omicron variant.

Since economists have suggested that much of Bitcoin’s returns, much like the decline in US stock markets, could be due to inflation fears, the possible correlations between them could shed some light on what to expect for price developments in December and 2022 .

Could Bitcoin follow the trend and crash along the exchange? At least in the next year, the crypto king could encounter a road full of obstacles in order to rally.

Bitcoin trading at $ 56,640 on the daily chart | Source: BTCUSD on TradingView.com

Related reading | Bitcoin is up 5%, why FED Powell’s nomination could give it fresh impetus

Stocks are feeling the pressure

With a correlation still possible, recent actions by the US government and the FED are reportedly affecting both Bitcoin and the price performance of the US stock market.

Biden’s Infrastructure Act introduces new requirements for crypto investors and companies with digital asset deals to report to the IRS what a future crypto tax will mean. Similarly, big CEOs who cash in on their shares remind high earners, too, are vulnerable in the face of a possible federal tax hike, as a 5% surcharge over $ 10 million and an 8% surcharge on incomes over $ 25 million to be announced.

On the flip side, there’s the recent announcement by Jerome Powell that the central bank may cut support to the economy earlier than expected, cut asset purchases and raise interest rates.

These events were followed by equity investors selling out of pressure, which painted a grim landscape for December as many expect sales before the start of 2022 could help them cope with the impending tax hike.

December on Wall Street looks shakier than usual as November turned into a volatile month in which we – and now still – saw a sharp rise in the averages. The Dow lost 3.7%, the S&P 500 0.8%, and Russell 2000 posted its worst drop since March last year, almost 4.3%. This could be interpreted as a general lack of confidence in the future of the US economy.

Big CEOs and corporate insiders like Satya Nadella, Jeff Bezos, and Elon Musk have reportedly sold roughly $ 69 billion worth of shares this year, up 30% from 2020 and up 79% in 10 years, InsiderScore said.

Bitcoin, S&P and Dow Jones: is there a correlation?

The shifts in reported correlation indices between BTC and the US stock market have increased since 2020 along with recent selling pressures from investors.

The theory that Bitcoin acts as a “safe haven” versus gold as a store of value when investors face a sharp market decline, and the theory that the price of digital coin is correlated to that of the stock market don’t go well together. However, we are moving in a field of possibilities rather than certainties.

Related reading | Billionaire Tells Investors; “Buy Bitcoin Now”

Crypto has seen a significant inflow of institutional money, and as retail investors lose dominance, the crypto market and the stock market could see a proportion of the same investor that could be reflected in a correlation.

Looking at the numbers, the correlation index is based on a scale from 1 – closer to the correlation coefficient – to -1 – moving in opposite directions – which means that 0 would not be a correlation. Since 2020, these indices for BTC, Dow Jones and S&P have come closer to 1.

In November, the index correlation of Bitcoin with Dow Jones reached 0.84 on the 27th, on the same day the S & P500 was 0.30 and rose from that point. Now the S & P500 is up at 0.48 and the Dow Jones is up at 0.63 – still pretty relevant -.

BitcoinCorrelation between Bitcoin, S & P500 (at 0.48) and Dow Jones (at 0.63) in the daily chart. | Source: BTCUSD on TradingView.com

However, the positive side of the institutional demand for Bitcoin is that it has maintained its critical support levels – which are required to hit new highs – and the constant trading volume through the price correction.

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