Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.
Bitcoin and S&P 500 Price Index correlation proves that cryptos and stocks have one thing in common – the American retail investors and corporation bosses. This week is one of the most dangerous in the last 11 years, as the corporate and personal income melts amid coronavirus preparations.
People see what happens in Italy and rush to the supermarkets to buy tons of food, supplies, toilet paper and so on. The shares and stocks lost another part of their value, and cryptocurrencies received a similar hit. The S&P 500 is lower than traders want it to be. All raising alarms over the future of banks and large firms of America.
The Coin Metrics data shows that since January, the correlation was exponentially growing. This means that Bitcoin price was rising and then tanking thanks to large institutional investors during the 90 days. They were selling everything together with Bitcoin. Per the data platform Sentiment, the 30 days correlation ratio is 0.64, while Coin Metrics give it 0.57.
Bitcoin Correlation Explained: Large, Small Investors Sell
Institutional money – a big part of this industry. The big investors already understand what’s going on: the coronavirus apocalypse is here and humanity has no cure. So, they just sell everything they can, including bitcoins. On the other side, it could be the small holders who prepare for a coronavirus attack and sell everything they can too.
But small holders don’t have that big sums to influence the price of Bitcoin.
Jamie Dimon and a hefty of other financial experts claimed that Bitcoin is just an asset in the eye of the investor. Investors from Wall Street even consider Bitcoin a sort of worst investment opportunity, thanks to risks. Cryptocurrency is the target number one in the personal quest of dumping assets if pain arises.
In the Bitcoin sphere, they claim that people take Bitcoin as something special. In reality, this is not the case at all. If you hold lots of Bitcoin, you accept it as something rare. As other people buy it, you get rich by just talking about Bitcoin all the time.
But the experienced market sharks do not talk about it, do not care about it. They just work until the ecosystem starts bringing profits, and that’s it. Good businessmen can take any asset and make it more profitable over time – that’s just their talent combined with passion. But when the world is at the brink of chaos, only the strong spirit can resist the temptation to drop off stocks and cryptocurrency for cash, gold or a beautiful set of head masks designed by Louis Vuitton. Per Peter Brandt, Bitcoin can even tank to below 1,000 level:
If I interpret the chart without bias, I would say sub $1,000
— Peter Brandt (@PeterLBrandt) March 12, 2020
Alternative Theories on the Bitcoin Price Action (with Stablecoins)
A few weeks ago, everyone was happy about the astronomic price rise of Bitcoin. Many of the websites attributed the rise to Xi Jinping‘s words about the blockchain adoption. However, independent experts claim that the cryptocurrencies received a major pump thanks to the Tether price peg being disrupted for a while due to the bearish trend. After a cascade of negative news about Tether, many traders were selling the asset. And the peg went from 1 USD to 97-98 cents per 1 USDT.
This time, Tether’s price of 1.05 USD per 1 USDT did the opposite – dumped the crypto market, helping the S&P 500 investors and retail holders. Why is that so? Per Librehash researcher, James Edwards:
“Bitcoin was artificially devalued because exchanges price Bitcoin in USDT rather than USD, yet still display the raw price of Bitcoin as pure USD rather than stipulating USDT.
The impact that this has is that it gives traders the impression that they are looking at the raw price of Bitcoin (per USD) when they’re truly looking at the price of Bitcoin in USDT.”
The more the traders sell a mainstream crypto asset, the less its price, the more the other assets cost on a global scale. When the traders are rushing into stablecoins, the price eventually breaks the peg (typically for a few hours). This makes other assets look even worse than they are, as all the market is interconnected.
Domino effect making more and more people sell their bitcoins. Worth noting that during the last crypto bear run, not only USDT but also three or four other stablecoins experienced upwards trend and the peg broke its standard value.
It looks cool for short trades but does add quite disturbing thoughts.