Because Bitcoin remains so tightly correlated to the S&P 500, any steep selloff in stocks, either today on the dark day’s anniversary or in the near future, the cryptocurrency could also be in trouble again.
Black Thursday is a day that crypto investors won’t soon forget. In a flash, Bitcoin price plummeted from over ,000 to under ,000, after just a few weeks prior trading well above ,000. The more than 60% fall came to a climax on March 12, 2020.
Will Bitcoin Bow To Black Monday Anniversary?
Cryptocurrency’s sudden correlation with the S&P 500 stock market index | Source: SPX on TradingView.com
If stocks do collapse and Bitcoin withstands, the decoupling could lead to stock market capital flowing into crypto, and further push the asset to never before believed heights.
Today marks the 33rd anniversary of the Black Monday on Wall Street that sent stocks setting historic records for intraday declines. Although this year already had a similar day of its own, there’s reason to believe that another collapse could happen in Bitcoin.
Since Black Thursday, the correlation between the top crypto asset and the most popular stock index in the United States, have traded lock and step. Bitcoin spent its entire life up until this year being positioned as an uncorrelated asset, but overall market sentiment matching across stocks and crypto has the two assets classes matching eerily closely. Here are the primary factors behind what could cause the crypto market to drop on the ominous anniversary.
Bitcoin following Black Monday price pattern from 1987 | Source: BTCUSD on TradingView.com
All markets felt the sting of the panic and mad dash into the safe haven of cash. However, after that day, markets rebounded into a V-shaped recovery. Bitcoin and the S&P 500 set a new high in 2020, but the Dow Jones failed to put in a higher high which could be more foretelling about the overall state of the US economy.
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And due to the ongoing correlation between crypto and stocks, even Bitcoin is following this pattern.
Although asset valuations across major stock indices and crypto assets are back at, or close to 2020 highs, the uncertainty around the election has investors taking a pause. Analysts and economists claim upside is limited in stocks, and various technical indicators point to a long-term top potentially being put in on the stock market.
Featured image from Deposit Photos, charts from TradingView.com
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