After a day of heavy selling in both stocks and the crypto market yesterday, yet another rise in correlations between the stock market and bitcoin (BTC) has caught traders’ attention.
As of press time on Friday morning (08:33 UTC), bitcoin was down by 3% over the past 24 hours to trade at a price of USD 9,491. The loss comes after the number one cryptoasset briefly traded above the USD 10k mark early yesterday morning UTC time, before a sharp sell-off sent it all the way down to the USD 9,050 level.
Yesterday’s crypto sell-off also coincided with a global stock market rout, with the US S&P 500 index sinking almost 6% in a single trading day. The selling came on fears of a possible second wave of COVID-19 cases, and a general sentiment that the stock market rally was overextended given the weak economic fundamentals.
As of Friday morning, the selling pressure on stocks had eased somewhat, initially sending US S&P futures higher before it went down by more 2% again. However, Dow and NASDAQ futures are up more than 1%, while stock indices in Western Europe are in the green today.
In Asia, however, stock indices in Japan, South Korea, Hong Kong, and Australia all still remained in the red.
Unsurprisingly, the combined selling in both stocks and bitcoin has increased the correlation between the two asset classes. According to data from BlockchainCenter.net, the 90-day correlation between the S&P 500 and bitcoin over the past 90 days is now mildly positive at 0.48. Perhaps surprisingly for some, the data also shows a stronger correlation between bitcoin and stocks than between bitcoin – often dubbed ‘digital gold’ – and real gold for all time periods measured except 1 year.
Correlation over the last 90 days
The data also shows that while stocks and bitcoin for a long time remained more or less uncorrelated, this changed in a significant way in early 2020 when both markets saw some of their biggest sell-offs in years.
BTC & S&P 500 correlation
Given the data, a logical conclusion to draw may thus be that stocks and bitcoin both remain subject to the same forces in the market, and that a general risk-on sentiment in the market will be needed before the digital asset can truly shine.
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