The S&P 500 has posted five consecutive days of losses. Bitcoin and cryptocurrencies also had a shaky week.
The S & amp; P 500, an index of the 500 largest publicly traded companies, fell for the fifth day in a row today. It ended the week 1,7% lower than on Monday morning, after falling by 0,8% today.
Crypto markets fall by 9%
Cryptocurrency markets are also down this week, falling from a cumulative market cap of $ 2.43 trillion on Sunday to $ 2.2 trillion today. This corresponds to a decrease of 9%. Much of the decline is due to a correction on Monday, but after markets stabilized, they slumped again by the end of the week. According to CoinGecko, Bitcoin has lost nearly 3% in the last 24 hours, Ethereum 5%, and Solana, which appeared to be immune to market declines in recent weeks, has lost 5%.
Okay, so that’s a lot of numbers. What does all this mean? Well, it’s just a small data point showing that cryptocurrencies can – or may not-respond to the same stimuli as the S&P 500.
The S & amp; P 500 and Bitcoin sometimes move in tandem, although the latter is touted as a safe haven against inflation. After years of negative or only slightly positive correlation, the two began to behave similarly in 2020. The correlation coefficient, which ranges from -1 to 1, reached 0.22. This means, roughly speaking: they are similar to each other by 22%. Cousins and cousins – but no siblings.
BTC-Gold Correlation Now Negative
Not surprisingly, BTC has become more correlated with gold, another safe haven, in 2020. These two assets, both embraced by a Venn chart of economic liberals, correlated at 34%. This correlation has now turned negative.
Still, the rising correlation level in 2020 reflected growing institutional interest in Bitcoin. Companies such as MicroStrategy and Square invested in the asset and banks and investment firms began to engage with the cryptocurrency. BTC was a financial instrument that could be used by mainstream investors – so it began to behave similarly to other asset classes.
And that could prove to be a stroke of luck. Last year, the correlation between the two markets was only 15,5%, according to data from the crypto-analysis company Skew. This correlation has been declining since November, when it was still at 46%. On a monthly basis, the correlation has fluctuated between 62% and -37% since October last year.
Not to mention the correlation between relative newcomer Solana and stock trading or Ethereum and crypto firms ‘ ETFs.
But you know what they say about cryptocurrencies: they are volatile. And they will behave like the stock market whenever they want.
Text credit: Decrypt
Last updated on September 11, 2021
Top Brokers for buying and trading cryptocurrencies
- Buy Real Bitcoin or Bitcoin CFDs
- Wallet and Exchange in one
- 14 + Cryptos
Cryptocurrencies are a highly volatile, unregulated investment product. Your capital is at risk.