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Bitcoin: Bitcoin’s correlation with stocks grows as risk appetite drops

Bitcoin: Bitcoin’s correlation with stocks grows as risk appetite drops
Written by publishing team

On Friday, stocks rose and then sank as traders digested the latest US employment data. Bitcoin followed suit, posting roughly the same moves.

The world’s largest digital currency fell 3.4% during the session to trade around $54,960, nearly 20% from its recent record highs. US stocks were also lower, with the S&P 500 losing 1.1% as of 1:10 pm in New York.

It is not unusual to see bitcoin and the stock market trading side by side in recent weeks. In fact, the 100-day correlation coefficient between Bitcoin and the S&P 500 stands at 0.33, among the highest readings this year. Proponents have long advocated Bitcoin as an asset that is not tied to traditional financial markets.



A coefficient of 1 means that the assets are moving with a constant step, while minus 1 shows that they are moving in opposite directions.

Bloomberg

“The cryptocurrency industry views Bitcoin as a very low-risk option. Some other currencies are seen as a high-risk option. But take a step back, and the rest of us view Bitcoin as a high-risk option in the investment landscape,” said Liz Young, Head of Investment Strategy at SoFi. The broader.” “So it all comes down to your point of view and your comfort level.”

Bitcoin is going through a difficult week and is on track to record its fourth consecutive day of bearishness. Many traders turned to technical indicators for suggestions on his next potential move. Currently, Bitcoin is testing its average price over the past 100 days, while Ether, the second largest digital asset, is testing its 50-day moving average. A break below those key levels could cause more pain ahead for investors.

b5Bloomberg

However, despite some recent rough corrections, Bitcoin is still up 100% for the year. Crypto bulls are still getting bolder, making predictions that bitcoin – and other coins – could still rally strongly through the end of the year.

Messari CEO and co-founder Ryan Selkis is coming out with a new report on what he expects for 2022 – in which he writes that there are some fundamental analysis that traders can follow to get a read on Bitcoin’s potential next moves. One is something called Market Cap Realized Value (or MVRV), which is the ratio of Bitcoin’s free market capitalization to realized value, which summarizes each coin’s market capitalization according to the last time the blockchain moved. The metric shows that the market value can remain the same while the metric rise is achieved – and vice versa.

b 6Bloomberg

When the scale drops below 1, Selkis jokes to “sell a kidney or a newborn to buy.”

“If history repeats itself, what does that mean in dollars? Reaching an MVRV of 3 again this year would take us into the $100,000-125,000 range. Not bad!,” Selkis wrote. “The King has no real competitor.”

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