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Fundstrat’s Thomas Lee Discusses: What Happens After the 10 Best Days for Bitcoin?

Exclusive Interview with Thomas Lee, Co-Founder, Managing Director, and Head of Research at Fundstrat Global Advisors

Thomas Lee, the Co-Founder, Managing Director, and Head of Research at Fundstrat Global Advisors, known for his opinions on the Bitcoin and crypto market has sat down with Blockchain.News to discuss his views on some macro trends and the Bitcoin industry we’re currently observing.

Lee has been looking into growth industries for the majority of his career. “Following wireless from 1993 for 17 years, following the mobile internet, it’s hard to know what the right business model is and how adoption takes place,” explained Lee.

“I think the future is uncertain. It’s still the early stages for digital assets and Bitcoin so I don’t know. Bitcoin is still not held by that many people, I think people overestimate the size of the market. If the market doubles or triples in size, the next wave adopters could have very different views of how they use crypto.”

The Birth of Fundstrat

After becoming an accomplished Wall Street analyst and seven years’ time at JP Morgan as the Chief Equity Strategist, Lee decided to start Fundstrat with a small team five years ago.

“Part of the reason we started Fundstrat was to really broaden the research topics that we could talk about. When you’re at a large firm, especially one that has Regulation A and C,” said Lee, it can be very limiting for the firm. “By being completely independent, we’re aligned with our clients. And it has allowed us to really expand our research efforts, including looking at things like digital assets, cryptocurrencies, and doing a lot of thematic and consulting work for larger companies.”

Rule #6: 10 Best Days for Bitcoin

Fundstrat’s rule number 6 is the “10 best days for Bitcoin,” indicating the Bitcoin’s 10 best days annually. “Since 2013, if you haven’t had exposure to Bitcoin in the 10 best days, you’d realize Bitcoin’s annual price return is negative,” explained Lee. “Bitcoin makes all of its gains in just 10 days each year. If you are an investor and you want exposure to a hyper volatile asset class, it’s not always going to be the best strategy to trade it. There’s going to be people who can trade Bitcoin, but for the majority of people who want to have the exposure, it is better to have long term holdings and not trade it.

What Does S&P Have to do with Bitcoin?

In an interview with CNBC, Lee mentioned that when the S&P breaks new highs, which he expects to this year, Bitcoin would follow. “Bitcoin and equity are a very unpopular opinion, but it’s the opinion of our firm is that because crypto and Bitcoin are primarily held by retail investors, it’s a risk-on asset,” said Lee.

In Lee’s view, S&P was range-bound for the last 20 months, therefore there was a constraint for Bitcoin price gains. “Now the S&P has just broken up to new highs. I think that’s setting the stage for 2020 to be really good for Bitcoin. But the reason we came to this view is if you look at the price history of Bitcoin, the best years for Bitcoin have taken place when the S&P is up more than 15%,” Lee added.

Bitcoin’s block reward halving: What does this mean for prices?

Lee says that the highly anticipated block reward halving should be positive for Bitcoin’s price. “It’s one of those theories widely talked about but it’s not clear if the effect is going to work as it has in the past. But when you look at supply and demand and demand is growing, it’ll grow in 2020 especially if Bitcoin finishes the year positive, which is within our expectations, then supply is going to get cut.” He added that reducing block rewards will lead to a shrinking supply of Bitcoin, and a rise in demand, which should lead to strong price gains, although it is not a guarantee.

Thoughts on Bitcoin ETFs?

Lee believes that the first regulated Bitcoin exchange-traded fund (ETF) is still years away, mainly due to the fact that the United States Securities and Exchange Commission (SEC) needs to have a better understanding of the nature of trading on the Bitcoin market. “I think there needs to be better transparency and better surveillance, institutional-grade infrastructure is helpful, like Bakkt and Fidelity,” added Lee. “The other issue is that the demand for an ETF could be so great, the top 10 ETF launches in the US have seen an average of $13 billion in buying in the first year. That’s a huge amount of buying pressure for Bitcoin. I think that Bitcoin’s price is too low today to handle an ETF.”

Weighing in on Libra

A large amount of response overall to Libra completely took Lee by surprise. “I think the US Congress and central banks weighing in on Libra is surprising given the project hasn’t even launched yet,” said Lee. “It’s strange that the notion of any company that goes global in payment processing is suddenly a threat to money sovereignty. I think it really speaks to the size and scale of Facebook and the expected success of the Libra project.”

Bitcoin Evaporated 30 Billion Market Cap Amid Coronavirus Pandemic and Bearish Economic Outlook

There is a sea of red for stocks and cryptocurrencies this week. Bitcoin has dipped below $6000 for the first time since May 2019. The selloff of cryptocurrencies has extended to altcoins in which the price of Ethereum and Bitcoin SV have dropped 30% and 40% respectively.

Bitcoin Price on March 12, 2020

Source: CoinMarketCap

The selloff of Bitcoin has intensified since 6 pm (HKT), leading to a 23% price drop from $7268. A 30 billion dollar market capitalization of Bitcoin has been wiped out within an hour and Bitcoin once dropped to a yearly low of $5705 (as of press time).

Reasons for the massive selloff

1) Global stock market crash and Coronavirus

The plummeting oil price due to the disagreement between Russia and OPEC nations has been the catalyst for plunging equity indices this week. The New York stock exchange once halted trading for 15 minutes when the S&P 500 tanked over 7%. The US stock market suffered another blow when CME Group announced to cease trading operation at the end of the day on Friday as a precautionary measure to coronavirus.

The widespread of the coronavirus could make things worse. The World Health Organization recently declared the disease COVID-19 a pandemic, in which US President Donald Trump just announced the travel ban to 26 European countries. S&P Composite 1500 Airlines has plunged 13% following Trump’s travel ban announcement.

The coronavirus has seriously dampened the European economy, with Italy tightened its lockdown on economic activities. The shutdown of economic activities indicates economic contraction, in which companies cannot service their debts. When their debts approach maturity, companies may need to dispose of their assets to repay the debts, which in turn leads to a vicious cycle and further economic downturn.

Cboe VIX Index

Source: Cboe

The growing uncertainty of macroeconomic outlook can be reflected by the alarming increase of Cboe VIX index, which has hit a yearly high of 67.65.

2) PlusToken Ponzi Scheme

As reported by Blockchain.News, OXT research recently released the report revealing how PlusToken scammers can bypass the Know-Your-Customer (KYC) compliance standards in regulated exchanges to transfer funds. The controversy of PlusToken is likely to dampen the investor’s confidence on Bitcoin, however, this has a limited impact on the massive selloff of Bitcoin.

Will DeFi suffer even more?

It is noteworthy that the leading tokens in DeFi suffer the most among other leading altcoins. Maker (MKR) resulted in a daily price drop of 44% where the daily price of Synthetix (SNX) plunged 36%. Apart from the massive selloff of Bitcoin, this can be further explained by the recent shutdown of Paradigm Labs.

The recent stock market crash led people questioning the reliability of centralized financial institutions, which Libertarian 2020 Presidential Candidate Adam Kokesh intended to create a decentralized financial system using AmeriCoin. From current observation, however, it seems that DeFi is too vulnerable to serve as an alternative to the centralized financial system.

There Would Be No Bull Market If There Was No Bear Market…

Trading Crypto with Eugene is a series of daily commentary on the crypto market and trading advice from Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. Hope you find it helpful!

BTC started the week with a $500 sell-off from $7,100, now down 1.5% with major ALTs drifting lower (LTC -4%, EOS -2.5%, ETH -2%) as well. No real catalyst, think the playbook was lack of a driver for BTC to head higher and as equities opening up red in Asia as investors start bracing for the corporate earnings season amid unprecedented uncertainty over the impact of Coronavirus, and most have already priced in this OPEC deal between Saudi and Russia.I’ll keep this short; think it’s going to get volatile and my bias is to run small positions for a move lower this week. Short-term bearish, but longer-term bullish. Like there would be no Christmas if there was no Easter, there won’t be a bullish market if we don’t see a bearish one. So this week’s strategy is going to be sold on rallies in BTC through spot and calls. My premise is that BTC follows risk assets, and I think risk assets are at an inflection point where they are going to start turning soon. From S&P 500 closing below 2800 key technical level (see chart below) to gold spot-futures spread rising to March levels, are some of the more prominent “turning point” signals.

This trendline resistance on hourly charts are mini-inflection points… you could see the latest breakout towards $7150 only to get sold back down below to $6600… my 2 cents, quite bearish short-term… Expect bounces back to $7k, but I am a seller…

Some levels for you to target lower if you want to sell on rallies like me….

S&P 2,800 level the line in the sand level… SPX closed below 2,800 last week, this week’s trading will be critical to watch…

Gold spot-futures spread widening, nearing the March S&P 500 sell off levels…

What happens when you get the best weekly performance in stocks after? (PS: We just had one of the best weeks last week)..

Disclaimer

The views and opinions expressed in this article are those of the contributor and do not necessarily reflect the view of Blockchain.News. Investors should be well aware of the volatility of cryptocurrencies and conduct their own research before making investment decisions.

Bitcoin Could Follow S&P 500’s Potential Fall After Slight Bullish Trend from US Employment Report

Bitcoin showed signs of a slight bullish uptick in its first session in July and maintained a short-term positive correlation with the S&5 500.

Bitcoin price managed to climb a little bit higher on July 1, after mirroring the upside moves the S&P 500 made on the same day. The cryptocurrency rose 1.14 percent and the S&P 500 rose 0.5 percent.

Optimistic US economic data most likely resulted in the gains of Bitcoin and S&P 500, as the non-farm payroll sector added over 2.3 million jobs in June. According to the ADP National Employment Report, it mentioned that 70 percent of new employment opportunities came from industries that were previously worst hit by the coronavirus pandemic, including leisure, hospitality, trade, and construction.

This report showed a positive trend in recovery post-lockdown, possibly conveying that the US economy is back on track, improving intraday sentiment among stock investors. The positive outlook depicted in the report allowed the S&P 500, Dow Jones, and the Nasdaq Composite to surge higher.

Bitcoin and stocks investors are waiting for the next big decision that could drive a new rally—whether or not the Federal Reserve would expand its stimulus operation before it expires in July.

CNBC analyst Jim Cramer said that the S&P 500 could hit 3720 points, but he expects to see a further decline on average. The Mad Money host, Cramer added:

“If it can’t break through last week’s highs at 3,100. Boroden thinks you need to prepare for pain because the near future could get ugly.”

Chartist Carolyn Boroden predicted that the market was in rally mode in May. Jim Cramer pointed out that although the index is trading above its 50-day and 200-day moving averages, another indicator shows an upcoming bearish trend.

Bitcoin is trading at $9,215 at press time, and while Cramer is worried about the potential downside of the S&P 500, Bitcoin could see a risk crashing towards $7,000 if it does not break resistance at $9,276.

Bitcoin S&P 500 Correlation explained: The-stock-to-flow model

The creator of the stock-to-flow and stock-to-flow cross-asset said that there was a correlation between Bitcoin and the stock market and that they are both correlated and co-integrated. The correlating pair’s “R-squared” value at 95%.

The stock-to-flow model measures the abundance of a particular resource, while the ratio of stock to flow is the amount of resource held in reserves divided by the total amount it has been produced annually. The stock-to-flow model treats Bitcoin as a commodity, similar to gold, as stated by billionaire Paul Tudor Jones, the cryptocurrency reminds him of the role that gold played in the 1970s. He added that the world will soon “crave new safe assets.”

PlanB predicted that the Bitcoin price should be $18,000 at the moment, or the S&P 500 must crash, according to his tweets. While March has seen a series of surges in COVID-19 cases and lockdowns starting in many countries, Bitcoin fell along with stocks and recovered, and PlanB made the conclusion that the S&P 500’s level should correlate with the Bitcoin price of $18,000. However, that was not the case; meaning that the only alternative left was for the stock market to fall.

As the stock-to-flow model makes predictions based on the amount of new Bitcoins entering circulation against the existing supply; Bitcoin’s supply is immutable, which the model then theorizes that by the next time Bitcoin enters into halving, Bitcoin will be worth $288,000.

Kraken Report: Bitcoin Trading Hit a 6-Month Low of 51% Amid Snail Speed in June

Leading US cryptocurrency exchange Kraken has presented a report through its research arm Kraken intelligence showing Bitcoin trading has nosedived by 51% depicting a six-month low since the start of the year.

Snail’s pace recorded in June

Bitcoin’s trading volatility was sluggish in June because it represented a 31% month over month (MoM) decline. As per the report, “A lackluster market drove Bitcoin’s annualized volatility to a 6-month low of 51% amid a -31% MoM drop in trading volumes this June, making it the quietest month since February for the world’s largest crypto asset by market capitalization.”

This trend flipped the correlation between Bitcoin and other financial instruments. For instance, its correlation with gold was weakened from 0,50 to -0.49. On the other hand, Bitcoin’s connection with the S&P 500 index was strengthened from 0.13 to 0.52.

This change of events was recorded amid propelled confidence of economic conditions bottoming and the worldwide stock market recovering.

Tightened S&P 500 Correlation

The report notes that Bitcoin’s price action was uneventful in June as the leading cryptocurrency’s relationship with the S&P 500 index was boosted. Therefore, market participants have been asked to be cautious and give CBOE’s Volatility Index (VIX) a keen eye as this will offer a better comparison between Bitcoin’s market dynamics and the traditional financial markets.

Kraken Intelligence also stipulated, “With Bitcoin hovering beneath the resistance of a multi-year pennant formation for more than 2 months and holding above its 50-week moving average, some believe bitcoin is on the brink of embarking on a new bull-market cycle in the month(s) ahead.”

The report suggested that a Bitcoin bull run could be triggered if it could break the $10,500 resistance level as this could prompt an uptrend by setting a higher high.

In a recent radio interview, ‘Rich Dad, Poor Dad’ renowned author Robert Kiyosaki stated that there was light at the end of the tunnel for Bitcoin as he has had a hawkeye for Bitcoin-stock fluctuations for quite some time.

Bitcoin Price and the Stock Market to Decouple Soon, says On-Chain Analyst

Since the emergence of the coronavirus pandemic, Bitcoin’s price action with the stock market, including the S&P 500 has been highly correlated, however, the end could be near. Bitcoin’s price has crashed in tandem with the stock market, as seen during March when the COVID-19 infections were surging in the United States, as well as the plunge seen last week.

Although the S&P 500 and Bitcoin’s price has been moving in tandem, an on-chain analyst believes that this correlation will soon come to an end. Bitcoin’s price has been trading mostly sideways for the past week and is currently priced at $10,882. Bitcoin was able to maintain its level after its slight surge earlier today.

Last week, on-chain analyst Willy Woo predicted that Bitcoin (BTC) will soon “decouple” from the stock market. He said, “SPX looking very weak, if that plummets, I’ll go out on a limb as say BTC will decouple in coming months. Post halvening and reduced derivative trading volumes fundamentally reduce BTC’s sell pressure against bullish fundamentals of an anti-inflationary hedge.”

Woo explains that if a massive stock market crash were to occur, Bitcoin and the stock market would eventually break its correlation. To back his claims of the decoupling of BTC and the stock market, Woo tweeted:

“If you want to see data behind the upcoming decoupling of BTC from the stock markets powered by BTC’s internal adoption, here’s some glassnode data. This is the active users of BTC after filtering for unique players (ignores multi wallet addresses belong to one entity).”

Additionally, Woo believes that the two markets would soon decouple as Bitcoin’s internal adoption curve would allow it to outpace the traditional markets. He added, “Fundamentals of user adoption have already broken all time highs.”

The former head of sales at Goldman Sachs, and CEO of Real Vision, Raoul Pal, also believes that Bitcoin has more upside potential than the traditional markets. The Wall Street veteran believes that Bitcoin will be the best performing asset in the next two years. According to Pal, Bitcoin was the only asset in the world that has outperformed the growth of the G4 central bank balance sheet. He added:

“Almost no trade matters except Bitcoin as this point.”

Stock futures climbed during overnight trading on Sunday, after a continuous four-week loss on Wall Street. The S&P 500 futures gained 0.3 percent, while Bitcoin has been trading up by 1.5 percent in the past 24 hours. Investors are still on edge regarding the signs of a worsening pandemic, in the US and in Europe.

JPMorgan Expects the S&P 500 to Rally, Will Bitcoin Follow?

JPMorgan is predicting a 10 percent rally for the S&P 500, and that the industrial and construction material stocks will be the benefiting sectors of the US markets next year.

Grace Peters, head of equities strategy at the wealth management arm of the JPMorgan Private Bank, said that investors should be adding cyclical exposure to their investment portfolios during the economic recovery after the coronavirus pandemic.

JPMorgan expects that the S&P 500 would rise to between 3,500 and 3,600 by the end of 2020, and 3,750 by this time next year, a 10 percent growth from its recent close at 3,352.

Peters added that the upcoming US presidential election would be unlikely to drive share prices in the longer term, based on analysis of elections in the past. According to JPMorgan’s analysis of markets during the years of US elections dating back to the 1930s, whether President Donald Trump or Democratic nominee Joe Biden would win would “unlikely to materially drive share prices.”

Although the S&P 500 is expected to rise, according to JPMorgan, Bitcoin has been showing signs of weakness lately. Bitcoin is trading at $10,692 at press time, and has been trading sideways for nearly a week. Bitcoin has struggled to move past $11,000 for some time.

The world’s largest cryptocurrency’s network’s health has been in decline over the past week. According to crypto analytics firm Glassnode, there has been a lack of new entrants to the Bitcoin network, and BTC’s adoption among new users and investors have not grown much either.

Bitcoin’s network growth has dropped from a score of 74 to 64 points over the past week, a decrease of 13.5 percent. Glassnode explained:

“Network Health dropped from a score of 74 to 64 points over Week 39, decreasing by 13.5%. The network growth subcategory lost 8 points due to a decline in the number of new users joining the Bitcoin network. Meanwhile, network activity dropped by 10 points as the number of BTC transactions also fell.”

Glassnode also added that on-chain transactional liquidity has been growing, while trading liquidity also decreased due to lower exchange deposits.

Bitcoin has shown a correlation with the S&P 500, although there seems to be a decoupling with BTC and the stock market. Willy Woo predicted that Bitcoin (BTC) will soon decouple from the stock market, if the stock market crashes. In this case, if the S&P 500 were to rise, perhaps Bitcoin would still be able to see more growth.

Bitcoin's Performance Outshines Gold and the S&P 500 Despite Recent Price Corrections

Bitcoin (BTC) continues to pull weight as one of the best investment assets to invest in today’s financial world, despite rumours of tighter regulations from authorities.

The performance of Bitcoin is best compared with its peers, especially gold, and the S&P 500 Index.

The latest of these comparisons was brought to the forefront by American investor and the Chief Executive Officer of DoubleLine Capital, Jeffrey Gundlach, who noted how the digital currency has outpaced gold and the S&P 500 in the past twelve months.

According to Gundlach, gold’s price has retracted by as much as 11% in the past 12 months, and the S&P 500 has seen a corresponding growth of 27% against Bitcoin, which stands tall at 467% over the past 12 months. This figure is hard to ignore and is essential to investors, particularly those that are still debating on whether to invest in Bitcoin.

Is Bitcoin’s Growth Sustainable?

The only advantage gold and the S&P 500 have over Bitcoin is the fact that they have withstood the test of time. Bitcoin is just a little above a decade old, with recent backing from institutional or corporate investors; time is what Bitcoin needs to convince everyone that it is the perfect asset to hedge with in a troubled economic and global financial crisis stirred by the coronavirus pandemic.

Gundlach also added clarified that Bitcoin’s journey to new highs may also come with numerous price corrections. Gundlach pointed out that “Great dispersions often precede great reversions,” an insinuation that Bitcoin may continue to experience price reversals as it journeys toward maturity.

While Gundlach’s position is worth pondering on, many Bitcoin proponents believe the digital currency is just getting started, and that as more people come to understand its unique capabilities and potentials, its future value, marked by an increased valuation, will be fully unlocked in no time.

Bitcoin Needs to Reclaim $36K to Invalidate the Bearish Thesis, BTC's Correlation with S&P 500 Hits ATH

Bitcoin (BTC) recently hit a 10-month low of $29K as more liquidation engulfed the market.

Market analyst Ali Martinez believes a bearish picture is being painted in the BTC market because it has broken the historical trendline. For this to be invalidated, the leading cryptocurrency needs to reclaim $36K.

Martinez pointed out:

“Bitcoin has broken its historic trendline. The last two times this happened BTC retraced by 37.67% and 41.32%, respectively. Similar price action could see prices crash by 40.59% to $20,000. BTC would have to reclaim $36,000 to invalidate this bearish thesis.”

Source: TradingView

The leading cryptocurrency was hovering around the $30,744 level during intraday trading, according to CoinMarketCap. On its way to $36K, Bitcoin will have to breach significant resistance at the $34,700 area. Martinez added:

“Bitcoin appears to be rebounding, but notice that it faces stiff resistance at $34,700 where over 668,000 addresses bought nearly 376,000 BTC.”

Bitcoin’s correlation with S&P 500 reaches historic highs

As more institutional investors continue jumping on the crypto bandwagon, the correlation between cryptocurrencies and stocks becomes stronger.

For instance, the three most majorly followed stock indexes in the U.S. – the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite – fell to their lowest level since 2020.

“Bitcoin correlation with the S&P 500 has reached a new frustrating all-time high,” Mati Greenspan, the CEO of Quantum Economics, said.

Source: Mati Greenspan

Similar sentiments were shared by JoeDiPasquale, the CEO of crypto hedge fund manager BitBull Capital. He noted:

“The monetary policy tightening is causing investors to reduce their exposure to risk assets and BTC’s current correlation to the S&P 500 has led it to also drop today.”

Meanwhile, Edward Moya, a senior market analyst at forex exchange company Oanda, believes the drop in crypto prices is based on the sell-off witnessed in tech stocks. Therefore, stability in the Bitcoin market will occur when investors stop panic selling and the bloodbath on Wall Street ends.

Are Institutional Investments Fueling Correlation Between Crypto and Stock Markets?

Interest rate hikes and runaway inflation has continued to engulf the investment scene, given that the global economy finds itself on rocky grounds based on factors like the invasion of Ukraine by Russia.

To tame rising inflation, various governments have resorted to increasing interest rates, which have had detrimental effects on the financial markets. For example, the Federal Reserve (Fed) raised the interest rate by 75 basis points (bps) earlier this month, a scenario that was last seen in 1994.

Traditionally, institutional investors were heavily inclined toward stocks in the financial scene, but they have spread their wings to include crypto in their portfolios.

With macroeconomic factors like interest rate hikes affecting both stocks and crypto, this begs the question: are institutional investments propelling the correlation between the two markets?

What triggered institutional investors to enter the crypto scene?

With the onset of the coronavirus (Covid-19) pandemic in early 2020, global economic turmoil emerged based on massive layoffs as social distancing and travel restrictions took effect.

As a result, governments like that of the United States adopted financial initiatives like quantitative easing or printing more money to caution their citizens against the economic effects triggered by the pandemic. For instance, the American administration printed more than $6 trillion for this purpose.

As many investors faced an uncertain future, cryptocurrencies emerged as a leading alternative to fill the void as hedges against inflation in the long term, and institutional investors were not left behind. Therefore, before the onset of the pandemic, institutional investors’ presence in the crypto space was not felt as retail investors dominated the market, but this has now changed.

For instance, MicroStrategy, a Nasdaq-listed business intelligence and software firm has been setting the ball rolling in institutional investments with its Bitcoin holdings surpassing 129,000 BTC.

Institutional investors also played an instrumental role in enabling Bitcoin to breach the then all-time high (ATH) of $20K in December 2020 after trying to break this zone for at least three years.

While payments giants like PayPal, Visa, and MasterCard have already set foot in the crypto sector, institutional investments can no longer be said to be operating in oblivion in this space.

For instance, PayPal recently upgraded its crypto wallet capabilities, enabling users to send supported digital assets to other wallets.

How deep-rooted is the correlation between crypto and stocks?

A notable trend has been happening in the market whenever investors forfeit stocks based on factors like surging inflation because Bitcoin’s price has also fallen.

Last year, Santiment acknowledged that as the S&P 500 index experienced mild drops, Bitcoin followed suit. The market insight provider explained:

“Over the past month, Bitcoin and the S&P 500 have been correlating quite strongly, and that includes the mild decline over the past couple of days. Meanwhile, the inverse correlation between BTC and gold’s price has calmed down significantly.”

Source: Santiment

The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest publicly-traded companies in the United States.

In April this year, the 30-day correlation between Bitcoin and tech stocks reached a 21-month high. Arcane Research acknowledged:

“Bitcoin’s 30-day correlation to tech stocks has climbed to highs not seen since July 2020. At the same time, Bitcoin’s correlation to gold has plunged to all-time lows.”

Source: TradingView/ArcaneResearch

The correlation between Bitcoin and S&P 500 has had various experts weigh-in, with some stipulating that the tightened monetary policy was the root cause. For instance, Joe Dipasquale, the CEO of crypto hedge fund BitBull Capital, noted:

“The monetary policy tightening is causing investors to reduce their exposure to risk assets, and BTC’s current correlation to the S&P 500 has led it also to drop today.”

As crypto prices plummeted last month, Edward Moya, a senior market analyst at forex exchange company Oanda, opined that a decline in tech stocks triggered the sell-off. During the same time, Mati Greenspan, the CEO of Quantum Economics, stated that the correlation between BTC and S&P 500 had reached a new frustrating all-time high.

Source: Mati Greenspan

After the Fed increased the interest rate by 0.5bps on May 4, a few days later, the crypto market cap dropped by 9.83%, whereas the major stock indexes in the U.S.– the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite – fell to their lowest level since 2020.

Therefore, tightened macroeconomic factors and investor sentiments have been affecting both cryptocurrencies and stocks, and the most likely answer is that institutional investors are behind the scenes.