Analysts from Morgan Stanley, Wells Fargo, and other financial institutions have recently reported on a newly-observed correlation between bitcoin and the traditional stock market. In the past, bitcoin’s place in financial markets has been that of an asset that was completely uncorrelated with anything else. Jan 03, · Bitcoin’s correlation to stocks (or lack thereof) may be one of its biggest selling points. Wise investors generally try to diversify their portfolios to reduce risk. When one asset, such as stocks, falls, another type of asset, such as bonds, tends to rise or at least not fall as much. Bitcoin losses seem marginal compared to the stock market, which faces significantly larger losses. Compared to the S&P , Bitcoin is a small creature, so it will be able to recover much faster from the damage, assuming we all survive this COVID ordeal.
Correlation between bitcoin and stock marketBloomberg - Are you a robot?
The problem is that people bought into Bitcoin waiting for it to offer the safe-haven status or the alternative investment many looked after. But, as the current crisis showed us, the only safe-haven asset turned out to be the U. When the DXY dropped, the Bitcoin price moved higher. Or, when the USD strengthened, Bitcoin moved lower. Even more interestingly, there is a direct, positive correlation between the stock market and Bitcoin.
The correlation rule states that in a portfolio, one should not add a new asset if the correlation exceeds 0. This way, the diversification benefit can be obtained. There is no diversification whatsoever — only an increase in risk. If such a forecast is correct, the positive correlation with the stock market must end.
Or, if not, the stock market will explode higher too. And the USD with it. Individuals and governments all around the world are doing the right thing. I want to analyze the data that I have available and see what really happened. Looking at the charts, anybody would see a correlation. In addition, panic is contagious. Even more contagious than the COVID, because you only need an internet connection to infect others with fear.
With many people sitting at home avoiding exposure to the virus, they find themselves with a lot of free time on their hands. The big hands are the ones making all of the waves. Investment groups that entered the market post are now leaving with as much cash as possible because they are expecting the worst. I think that the Bitcoin sell-off is just a natural and very human reaction to the panic we are experiencing globally. Bitcoin losses seem marginal compared to the stock market, which faces significantly larger losses.
The 18th of May is right around the corner, so this may be a great time to buy Bitcoin at a discount right before the halvening. Investing means risking your capital and can potentially lead to significant losses. Remember that. Friday, December 25, Write for us. News Bitcoin. Gemini Review. Crypto market crash may have been the result of market manipulation. Ethereum contenders.
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