Tuesday, March 10, 2020

Downtrend affects both bitcoin and the stock market

Key facts:
For a few days now, both markets have been exhibiting similar behavior.
The most outstanding stock market indices show a downward trend.

Bitcoin's price and stock market indices may have a correlation to certain events, despite the fact that each asset has different characteristics in its operation.

Since February 23, both the cryptocurrency market and the stock market have shown a downward trend that has extended until today. The fact that both markets behave so similar is striking, since both have relevant characteristics that differentiate them.

It should be noted that the unregulated cryptocurrency market never closes. This means that you can participate in the purchase or sale of bitcoins and other crypto assets at any time and any day of the week. While the highly regulated stock market only opens from 10:30 am to 4:30 pm, Monday through Friday.

common behavior

In order to better understand the dynamics of both markets, we are going to make a comparison between bitcoin and the Standard & Poor’s 500, also known as the S&P 500, one of the most representative stock indices of the current market situation.

In this sense, since midday on March 7, a significant drop in the price of bitcoin is observed, which dragged its value from the range of USD 9,100, to USD 7,730 at the time of writing, which represents a fall at the price of almost 17% in two days.

On the other hand, if we analyze the S&P 500 index of the stock market, we can see that the downtrend was present since March 5, when it marked 3,120, while to the current date it is in the range of 2,746, which represents a drop of more than 11%.

In this way, when comparing the bitcoin graph with the S&P 500 index, in periods of one hour, it becomes noticeable that they have a very similar pattern. This despite the fact that the market uncertainty about the bitcoin price became more noticeable between March 5 and 6, dates when the S&P 500 index was already showing a clear downward trend.

Later, during the weekend of March 7 and 8, it was when the drop in the price of bitcoin became noticeable, along with the majority of altcoins in the market. Now, to this date, in the course of this March 9, the S&P 500 index and other prominent stock market indices, such as the IBEX 35 of the Spanish stock market, the Dow Jones, and the Euro Stooxx 50 opened in red numbers, evidencing a clear downtrend in most markets.

This is how the bearish pattern registered by the cryptocurrency market in recent days goes hand in hand with the situation of the stock indices. With this, the correlation becomes clear. Possibly the nervousness present in the stock market has acquired potential to affect the net volume of the cryptocurrency market. It will be necessary to closely monitor the movements of both markets to know if this similar behavior plays in favor or against the price of cryptocurrencies.