Data shows that bitcoin has had a correlation with the US stock market for some time now, but until recently the two have not moved together.
Bitcoin Correlation With US Stocks Could Be Weaker As BTC Is Moving Differently
As told by an analyst at Cryptoquant PostBTC has gone down over the past week while stocks have made some gains.
A “correlation” between two assets (or markets) exists when both their prices follow the same general trend over time.
For bitcoin, there has been a strong correlation with the US stock market over the years. The reason the markets are so tied is the rise of institutional investors in crypto.
Such investors view BTC as a risk asset and exit the token as soon as there is great uncertainty in the market (hence reducing the price of crypto with stocks).
Here is a chart that shows the prices of bitcoin, S&P 500 and NASDAQ over the years:
Looks like the assets have followed similar trends in recent times | Source: CryptoQuant
As you can see in the graph above, Bitcoin had no relation to the stock market in 2019 and early 2020, but that all changed when COVID arrived.
After the Black Swan crash in March 2020, the price of BTC started following the S&P 500 and NASDAQ.
However, while BTC showed the same general long-term trend, the crypto remained much more volatile than stocks.
The correlation has continued through the bear market, but has broken apart in the last week or so.
While there has been some correction in the US stock market over the past 7 days, bitcoin has instead suffered a sharp decline.
These markets showing divergent behavior recently may suggest that the correlation between them may be weak.
With the latest drop, BTC has also lost its previous all-time high support line, which has never happened in previous cycles.
The volume in the post suggests that this recent trend is a sign of weakness in the crypto market, which could lead to further downside in the near future.
At the time of writing, bitcoin is priced around $16.5k, down 20% over the past week. In the past month, the crypto has lost 15% in value.
The chart below shows the coin’s price trend over the past five days.
The value of the crypto seems to have remained below $17k in recent days | Source: BTCUSD on TradingView
Featured image from André François McKenzie on Unsplash.com, charts from TradingView.com, CryptoQuant.com