This year, we've seen Bitcoin drop to $ 30,000, double to $ 60,000, then hit the November all-time high above $ 68,000, and drop again around 20% in the same month, stabilizing around $ 57,000.
As Bitcoin is trading lower just like traditional US markets, we may be seeing a correlation. Stocks have been down lately on uncertainty and selling pressure that followed the recent declining announcement from the Fed, the introduction of the Biden invoice, and financial fears surrounding the Omicron variant.
What economists have expressed that a significant chunk of Bitcoin returns could be tracking inflation fears in a similar way to falling US equity markets, possible correlations between them could shed some light on what might be expected. for December and the 2022 price action.
Could Bitcoin Follow The Trend And Crash In The Stock Market? At the very least, the king of crypto could find a bumpy road to reunite next year.
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Stocks feel the pressure
As correlation remains a possibility, recent actions by the US government and the Fed are reportedly affecting both Bitcoin and the US stock market price action.
From biden infrastructure bill introduces new requirements for crypto investors and companies with digital asset deals to report to the IRS, that is, a future crypto tax. Likewise, top CEOs who collect their shares recall that high-income individuals are also fragile to a possible increase in federal taxes, as there are airs of a 5% surcharge on income over $ 10. million and 8% on revenues of more than $ 25 million.
On the other hand, there is Jerome powellThe recent announcement that the central bank is likely to reduce support for the economy earlier than expected, reduce asset purchases and raise interest rates.
These events have been followed by stock investors selling under pressure, painting a bleak outlook for December as many hope that selling before the start of 2022 could help them cope with the impending tax increase.
Wall Street December looks more shaky than usual as November turned into a volatile month in which we saw, and now continue to see, stagnant large averages. The Dow Jones was down 3.7%, the S&P 500 down 0.8%, Russell 2000 posted its worst loss since March last year with a drop of almost 4.3%. This could be seen as a general lack of confidence in the future of the US economy.
Top CEOs and corporate insiders like Satya Nadella, Jeff Bezos and Elon Musk have reportedly sold about $ 69 billion in stock this year, up 30% from 2020 and a 79% increase in 10 years, InsiderScore said.
Bitcoin, S&P and Dow Jones: Is There a Correlation?
Changes in reported correlation indices between BTC and the US stock market have increased since 2020 along with recent selling pressure from investors.
The theory that Bitcoin functions as a "safe haven" store of value compared to gold if investors face a major market downturn, and the theory that the price of the digital currency correlates with that of the market values, they do not go well together. However, we are walking through a field of possibilities rather than certainties.
Related reading | Billionaire Tells Investors; "Buy Bitcoin right now"
Crypto has seen a significant influx of institutional funds and as retail investors lose dominance, the crypto market and the stock market could be seeing share from the same investors that could translate into correlation.
Regarding the numbers, the correlation index is based on a scale from 1 โmore close to the correlation coefficientโ to -1 โmoving in opposite directionsโ, which means that 0 would not be a correlation. Since 2020, these indices have come closer to 1 for BTC, Dow Jones, and S&P.
In November, the level of correlation of the Bitcoin index with Dow Jones reached 0.84 on the 27th, on the same day, the S & P500 was at 0.30 and rose from that point. Now the S & P500 is up 0.48 and the Dow Jones is down 0.63 - still quite relevant.
However, the positive side of institutional demand for Bitcoin is that it has maintained its critical levels of support, necessary to reach new highs, and a constant trading volume through the price correction.
