Markets
Bitcoin is no longer keeping pace with US stocks, what this could mean for the cryptocurrency market
Recent data shows that Bitcoin has completely detached from American stocks. This is significant given that the flagship cryptocurrency and these stocks had a positive correlation before now, which has undoubtedly had a positive impact on Bitcoin and the broader cryptocurrency market.
Bitcoin Has No Correlation With US Stocks
Data of IntoTheBlock Market Intelligence Platform shows that Bitcoin’s correlation with the Nasdaq 100 and S&P 500 has fallen to -0.78 and -0.83, respectively. This means that Bitcoin and these assets have a strong negative correlation, with their prices tending to move in opposite directions.
Indeed, this has been the case for some time now, as the flagship cryptocurrency has been in a major downtrend for some time. In contrast, the Nasdaq 100 and S&P 500 have continued to enjoy considerable gains. Data from IntoTheBlock shows that the Nasdaq 100 and S&P 500 are up over 7% and 4% over the same period. last monthwhile Bitcoin is down more than 15%.
A Bloomberg report also highlighted the “collapsing” correlation between Bitcoin and U.S. stocks and attributed the decline to the massive selling pressure the flagship cryptocurrency is experiencing. Joshua Lim, co-founder of trading firm Arbelos Markets, told Bloomberg that this selling pressure caused by companies like German Government has “capped” Bitcoin’s rise as these U.S. stocks trade at all-time highs.
Data from IntoTheBlock shows that it was this selling pressure that caused Bitcoin to break away from these US stocks. As of early June, Bitcoin’s correlation with the Nasdaq 100 and S&P 500 was 0.86 and 0.73, respectively. However, this strong positive correlation began to decline just as Bitcoin miners began dumping a significant portion of their holdings. Bitcoinist reported that these miners sold more than 30,000 BTC in June.
Bitcoin also saw increased selling pressure towards the end of June thanks to the German Governmentwhich has begun to dispose of some of the bitcoins seized from the pirated movie Movie2k. This selling pressure has not slowed down, as the German government has continued its sales frenzy this month.
Moment of Truth for Bitcoin and the Stock Market
Bitcoin and US stocks will be tested again when the US Consumer Price Index (CPI) Inflation data is released on July 11. The highly anticipated report is expected to show that inflation in the country is slowing, further strengthening the case for lower interest rates. Such a development is undoubtedly bullish for these assets, especially Bitcoin and the broader cryptocurrency market.
In the short term, positive inflation data should trigger a rebound in the price of Bitcoin, which is currently attempting to recover $60,000 as support. Crypto analyst Justin Bennett warned that Bitcoin must hold above $57,800 or risk falling to from $50,000.
Featured image created with Dall.E, chart by Tradingview.com