Decoupled: Analyzing Bitcoin Diverging Away From the Stock Market
But before crypto investors get their hopes up too quickly, here’s a deep dive into the possible decoupling of the stock market and Bitcoin correlation, and what that might mean for both asset classes.
Crypto Correlation With The S&P 500 Diverges, Is The Decoupling Here?
Analysts had been calling for such a scenario to take place, pointing to ongoing Bitcoin adoption and network effect as the driver behind the divergence. For example, daily active BTC addresses have grown considerably, along with non-zero BTC addresses. More Bitcoin is also being moved off exchanges, so there’s less to be sold into the market. But is it far too soon to be calling it quits on the correlation?
RELATED READING | BITCOIN SETS NEW ALL-TIME HIGH IN THESE GLOBAL CURRENCIES
The leading cryptocurrency by market cap possibly decouples the ongoing stock market correlation | Source: BTCUSD on TradingView.com
Bitcoin price this week surged by over ,000 in a single day, taking the cryptocurrency hurdling toward 2019 highs. At the same time, the stock market that’s traded lock and step with the crypto asset all throughout 2020, dropped hard. The phenomenon is something top crypto analysts had called for, who now expect Bitcoin to break out into a bull market.
It is possible, and given Bitcoin’s infrequency history tracing this closely, shaking off the correlation and decoupling could be here. But if the uncanny correlation continues, a bubble bursting in stocks could send Bitcoin and cryptocurrency back into a bear market.
But are analysts jumping the gun that the correlation has ended? | Source: BTCUSD on TradingView.com
Can A Bitcoin Bull Market Begin, While The Stock Market Tops?
What exactly does this sudden and unusual correlation mean for crypto? | Source: BTCUSD on TradingView.com
Starting ahead of Black Thursday, the crypto market and stock market topped out in early 2020, then suffered a catastrophic collapse. Bitcoin dropped well over 50% in 24 hours, and the stock market saw its worst quarterly close on record just after setting an all-time high.
Featured image from Deposit Photos, Charts from TradingView.com
Last week, Bitcoin took the world of finance by storm, when it exploded by over ,000 in a single day, taking out 2020 highs and targeting last year’s peak. And while the move itself was enough to cause plenty of chatter, much of the discussion was centered around the cryptocurrency’s sudden divergence in correlation with the S&P 500.
RELATED READING | ALWAYS ON: BITCOIN TO SURPASS S&P 500 TRADING TIME WITHIN TWO YEARS
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