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Billionaires and Bitcoin: Stan Druckenmiller’s Alarming Warning on Stocks While Paul Tudor Jones Remains Bullish on Bitcoin

Billionaire Stanley Druckenmiller said during a webcast held by The Economic Club of New York that the risk-reward calculation for equities is the worst he has ever seen in his career. The billionaire expressed his doubts about the US equities’ possibility of logging a V-shaped recovery. He added that government stimulus programs will not be enough for the economic recovery post-pandemic.

Stan Druckenmiller is one of the world’s top money managers, he was previously the Chief Strategist for George Soros, and later converted his hedge fund into Duquesne Family Office in 2010. With maintaining a strong track record for decades, he has an estimated net worth of $5.8 billion according to the Bloomberg Billionaires Index, and has made him one of the world’s top money managers.

Druckenmiller’s described the likelihood of the recovery as a “fantasy,” as he highlighted the risk-reward calculation for the Wall Street indexes is currently at its worst. This, in turn, could mean that the US Congress’ stimulus programs and the Federal Reserve’s lending programs may not be enough for saving stocks from a bear market.

Bitcoin has been struggling to push through to $9,000, as the billionaire’s prediction could set back the cryptocurrency’s ability to continue its rally. As Reuters reported in late April, more appealing to investors more than equities due to its higher risk-reward calculations. Druckenmiller’s prediction projects Bitcoin’s market capitalization could be at risk of similar downsizing as the stock market, given its correlation with the S&P 500 seen in the last few months.

Druckenmiller believes that cash liquidity required to pump assets that are considered risky will shrink shortly as the US Treasury will soon end the private economy which could overwhelm the Fed purchases through borrowing consistently.

Billionaire talks Bitcoin: Paul Tudor Jones’ The Great Monetary Inflation

Druckenmiller’s comments come not long after another billionaire, Paul Tudor Jones admitted to investing in Bitcoin to hedge against inflation. As another of Wall Street’s most seasoned and successful hedge fund managers, Jones compared Bitcoin to gold by saying that the digital currency reminds him of the role that gold played in the 1970s.

Jones said in an investor letter, called The Great Monetary Inflation, “The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be Bitcoin.” As money-printing will push traditional investors to gold, he believes that the world will then “crave new safe assets,” which may be beneficial to Bitcoin. He stated that Bitcoin represented at least 1 to 2% of his total assets in an interview with CNBC.

Image source: CNBC

Bitcoin Price Surges Amid Stock Market Bull—But This Could All Collapse if China Repeats its 2015 Stock Market Bubble

Bitcoin price saw a slight surge at the start of this week, while China’s stocks soared as no new local coronavirus cases were reported. US stocks also followed and saw an upward tick as investors focused on news related to the new COVID-19 vaccine and treatments.

According to market analyst Jim Wyckoff, Bitcoin bulls “have the overall near-term technical advantage,” and that the recent collapse in volatility could lead to a bigger price move.

China told its citizens to buy stocks—a possible stock market bubble?

The Shanghai Composite Index has seen its biggest one-day percentage gain since the summer of 2015 when the stock market bubble burst. The index saw a 5.7 percent surge on July 6, following a state-owned publication in China advocating for a “healthy bull market” in the country for post-pandemic recovery.

However, stocks in the Asia Pacific were mixed on July 7 as investors await the Reserve Bank of Australia’s interest rate decision. Mainland China continued on July 6’s gains, as the Shenzhen component jumped 2.842 percent and the Shanghai Composite rose 1.32 percent.

In a front-page editorial in the state-owned China Securities Journal, the publication said investors should look forward to the “wealth effect of the capital markets.” Retail investors have been playing a role in the recent bull market, along with professional traders.

There has been speculation about whether the trading circles and with the retail investors rushing in with the effect of the publication had anything to do with a possible stock market bubble forming in China. With the recent rapid surges, traders compared to the stock market bubble in 2015, with stocks trading at nearly 5,200, while July 6’s close was at 3.332.88.

Mark Williams, the Chief Asia Economist at Capital Economics said:

“There’s quite a long history of policy makers using the media to drive up the market. It doesn’t always end very well. We saw that back in 2015, exactly the same statements then. They tried to push the market higher. It worked for a while and then the market collapsed.”

Kenny Wen, wealth management strategist at Everbright Sun Hung Kai said:

“It may be too early to say it is a bubble, as in terms of valuation, A shares are still reasonable. The transaction volume has increased sharply. We see both domestic retail investors and global investors rushing into A shares.”

Bitcoin and the stock market

Following the Asian stock market, US stocks jumped as well amid the second wave of surging coronavirus cases in the country.

The stocks on Wall Street saw an uptick as well, while the Dow Jones Industrial Average jumped 1.8 percent, and the S&P 500 rose 1.6 percent, and the Nasdaq Composite hit an all-time high, surging 2.2 percent to close at 10,433.65.

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 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.

The recent Bitcoin price rally was ignited by China’s record stock market gains on July 6. As the United States has vast exposure to world’s second-largest economy, the US stock market simply followed suit.

Goldman Sachs: Yuan crash forecast

Goldman Sachs is expecting the Chinese yuan to fall to its lowest since 2008 in the coming months due to the existing US-China trade war, and now the US potential sanctions on China over its feud over Hong Kong and the implementation of the National Security Law.

The yuan has been forecasted by Goldman Sachs to fall to 7.25 per dollar during the next three months before recovering to 7.15 per dollar over six months, then to 7 per dollar in the next year. As the firm sees the yuan falling to its 2008 low, the potential for Bitcoin to experience an explosive price rally has been raised.

“Disputes between the two countries now cover a range of issues that are unlikely to be resolved soon,” wrote Goldman strategists, including Zach Pandl. Due the tolerance from the Chinese central bank on gradual currency depreciation, the strategists added, “As a result, we expect ongoing capital outflow pressures to weigh on the exchange rate and are revising our dollar-yuan forecasts higher.”

Image source: André François McKenzie via Unsplash

Gemini Co-Founder Winklevoss Thinks BTC Is Set For Its Next Bull Run, With the Fed's Money Printing

Co-founder and CEO of Gemini crypto exchange Tyler Winklevoss thinks that the US Federal Reserve’s economic stimulus strategy would positively impact Bitcoin and its pricing on the crypto market.

Winklevoss Likes That the US is Printing Money

On July 22, the Bitcoin investor tweeted on his social platform:

“The Fed continues to set the stage for bitcoin’s next bull run.”

He referred to the Federal Reserve’s ongoing search for a key strategy that would help in salvaging the economic repercussions caused by the pandemic and the solutions that the US have been considering.

The Winklevoss twin thinks that with the Federal Reserve printing money in the goal of delivering an economic stimulus package, this financial phenomenon only means good things for Bitcoin (BTC). In fact, Winklevoss thinks that the more the Federal Reserve prints fiat, the more it will drive up the price of BTC on the crypto market. Also, with the current economic turmoil, investors will be more motivated with looking at Bitcoins as an alternative investment solution, in comparison with traditional mainstream markets and fiat dollars.

COVID-19: A Puzzle US Economists Are Working On

In light of the pandemic, the United States government has been scrambling to figure out when to roll out stimulus checks and what the best stimulus package would be. Economists have long used alphabets like V and U when describing successful economic recoveries. However, with the pandemic downturn being truly a one-of-a-kind case scenario, economists are now saying that they may need to use new shapes to illustrate the potential recovery process.

Despite all the frenzy caused by COVID-19 and the worldwide economy taking a huge hit, Tyler Winklevoss puts a positive spin to things. The philanthropist tweeted:

“When money printer go brrrr and inflate the stonks market, it’s time to bitcoin.”

Tesla CEO Not with Winklevoss On Stimulus Money

Not everyone shares the Gemini co-founder’s positive views, however. Elon Musk, though claiming to own a bit of Bitcoin himself, did not publicly comment regarding the parallel between Bitcoin and US central bank’s stimulus support strategy.

The Tesla CEO however did appear on Joe Rogan’s podcast channel earlier this year and shared his two cents regarding the US’ strategy for stimulus money printing. Musk reasoned that given the fact that the US is endlessly printing stimulus money to give back to Americans and small businesses operating in the country during the lockdown, the American population might start taking the stimulus situation for granted and view the government as an endless source of financial support.

In that sense, he fears that key considerations resulting from the pandemic, such as loss in production and rising unemployment, may not be taken seriously at all and may occupy a backseat role.

USA Proceeds Forward with Stimulus Package

Federal Reserve officials are planning on moving forward with the economic stimulus, and they are expected to discuss policies pertaining to the topic next week. However, they have expressed their flexibility in leaving the economic policy on hold, as they are still constantly uncovering new information about COVID-19’s impact on the US economy.

Will Bitcoin Replace Gold as A 'Traditional Safe-Haven Asset?' Experts Debate

There has been a lot of frenzy ongoing for traditional and crypto markets, with Bitcoin surging for the first time in months and crypto investors jumping at the occasion.

Why Is BTC Soaring?

Nigel Green, CEO and founder of financial consultancy firm deVere Group, addressed Bitcoin’s bullish traction on the crypto market and boldly stated on his Twitter platform that the cryptocurrency was potentially going to “knock gold from its long-held position” of being a safe-haven asset. On traditional stock markets, when stocks drop in value and inflation rises, the trend appears to be to invest in gold, seeing as it is deemed a safe investment.

Green furthermore elaborated and tweeted that the Bitcoin value on the trading market was “surging in tandem with gold on US-China tensions.” As sociopolitical tensions and power struggles are heightening between USA and China, the world’s two largest economies, Green is saying that there is a lot of potential of Bitcoin bullishly soaring even more, if new crypto investors and established BTC bulls took matters into their own hands and diverged from traditional stocks.

As if to prove the truth behind his educated statement, it appears that investors are very much branching out from traditional stock markets, with the global economy going downhill due to the ongoing pandemic and political battles. Bitcoin therefore may regarded by many to be more and more of a safe-haven asset.

Gold Is Also Soaring to The Skies

The price of gold has also been escalating, much to experts’ amazement. A lot of financial investors are speculating that this phenomenon may be due to the worsening of US-China trade and political tensions. Others looked at the economic stimulus package that US plans on delivering and as an explanation, they pointed to the drop of the US dollar resulting from mass money printing.

Investors may therefore turn more to gold and Bitcoin as hedges, leading to a surge in value for both financial assets.

Gold Takes Everyone By Surprise

The jump in gold came as a surprise to many market experts. It is regarded as an unusual phenomenon, because stock prices have also escalated recently, after a drop in early March when COVID-19 began spreading across the US.

Usually seen as a safe haven when stocks are falling or when inflation is rising, the rise of gold comes as a shocker for many, because none of the two mentioned phenomena are currently happening.

Batting For Team Gold- Peter Schiff

Gold-advocate and Euro Pacific Capital CEO Peter Schiff does not appear to share Green’s views on Bitcoin being a safe-haven asset, as the investor has long been known to be “team gold.” On July 27, he tweeted that in light of COVID-19 and the economic downfall resulting from it, the US Federal Reserve “will keep printing dollars until the dollar crashes.” In his opinion, gold investors are fully aware of this mass printing strategy, and so gold will keep on soaring.

What’s Next For BTC?

As for Bitcoin, since its recent surge past the $10,000 checkpoint on Monday, crypto investors are now interested in seeing the cryptocurrency reach the next mark – set at a critical $10,500.

Bitcoin Price Conquers $12,000 But at Risk of Pull Back in the Current Stock Market Bubble Territory

While the tech sector and the Fed injections have led the US markets to rally higher, markets around the world have seen a similar trend, while the global economic recovery picks up its pace.

Stocks have rallied in the past weeks, while the Dow Jones Industrial Average (DJIA) rose 6.7 percent.

According to Holger Zschaepitz, the global stock market has reached a “bubble territory,” as shown by the Buffett Indicator. The Buffett Indicator shows a fair valuation of stocks relative to the US economy, by dividing the stock market’s market capitalization by the United States’ GDP. Zschaepitz tweeted:

“Global stock mkts have hit another milestone. All stocks now worth more than 100% of global GDP for the 1st time since 2018, pointing to stretched valuations. For Warren Buffett, a Market Cap to GDP Ratio >100% means stocks in bubble territory.”

The global markets have entered into a bubble territory for the first time since 2018, and if the indicator is above 100, then it means the stock market is heading into a bubble.

Bitcoin (BTC) price pushed past $12,000 for the second time this month, after breaking its resistance level at $11,800. Altcoins including Chainlink (LINK) and its rival Band Protocol (BAND) have been witnessing double digital gains. At press time, Bitcoin has slumped a little lower, trading around $11,972.

Bitcoin price could see a further correction if it fails to break $12,000 again, with the possibility of the stock market entering the bubble territory.

Chainlink (LINK) has reached another all-time high at reaching $14.0551 on Binance, while also climbing up the market capitalization ladder, reaching the sixth place on CoinMarketCap.

China told its citizens to buy stocks—a possible stock market bubble

As reported by Blockchain.News, in early July, the Shanghai Composite Index has seen its biggest one-day percentage gain since the summer of 2015 when the stock market bubble burst. The index saw a 5.7 percent surge on July 6, following a state-owned publication in China advocating for a “healthy bull market” in the country for post-pandemic recovery.

Following the Asian stock market, US stocks jumped as well amid the second wave of surging coronavirus cases in the country.

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.

Winklevoss Twins Brief David Portnoy on Bitcoin, BTC Talks Continue

American internet celebrity David Portnoy officially hosted the Winklevoss twins for a long-due conversation regarding Bitcoin (BTC) and cryptocurrencies.

Barstool Celebrity and Winklevoss Talk Bitcoin

Initially calling out the Gemini co-founders in an August 4 Twitter video, Portnoy took to his social media and released a video begging the Winklevoss Bitcoin billionaires to come over to teach him about the cryptocurrency market, repeating numerous times that he didn’t know anything about BTC. He said that he had invested in bitcoins at some point and that he lost the cryptos, jokingly saying that his “20 grand was just sitting somewhere in the Ether.”

The Barstool Sports founder and stocks enthusiast resorted to his usual antics on his Twitter platform and implored the Winklevoss twins to “make it simple.” He said that if they could just show him how to “do it,” invest in Bitcoin in a strategic way, then he will most definitely buy BTC.

Cameron and Tyler Winklevoss both responded to the Davey Day Trader’s video amicably and Portnoy hosted the Bitcoin advocates in a podcast released yesterday.

Winklevoss Billionaire, Always a Bitcoin Fan

Not only does founding the global crypto exchange Gemini count among their exploits, but Winklevoss twins are also known to be the first Bitcoin billionaires. Needless to say, they have both been huge advocates of Bitcoin, which is the largest cryptocurrency on the market, valued north of $11,700 at the time of writing.

The twins have both on numerous counts leveraged their social media presence to educate their followers on the advantages of investing in BTC.

With the US’ economic stimulus strategy in light of the global economic downfall and COVID-19, Tyler Winklevoss had publicly tweeted that the Federal Reserve was continuously “setting the stage for Bitcoin’s next bull run.”

With the Federal Reserve having to print money to deliver economic stimulus relief and the US dollar consequently depreciating in value, Winklevoss is saying that this will in turn drive the price of Bitcoin up on the crypto market.

Bitcoin Emerges from Slump

Winklevoss’ faith in the cryptocurrency has proven to be a self-fulfilling prophecy, as Bitcoin recently emerged from a long slump and has slowly regained its place on the market, creating quite a buzz on Wall Street.

Bitcoin has finally surged past the $11,500 mark for the first time since last September. Cryptocurrency investors worldwide have the utmost faith in BTC, which is the most dominant and valued cryptocurrency on the market. Despite the recent bull run and Bitcoin dropping after having pushed past the $12,000 mark point twice, experts and crypto enthusiasts like the Winklevoss are adamant on Bitcoin still shining and on its future potential on the crypto market.

Wall Street veteran Raoul Pal even publicly stated that according to his predictions, “Bitcoin is likely set to be the best performing major asset in the world over the next 24 months and by a big margin.” Bitcoin enthusiasts are optimistic about the cryptocurrency, despite the global stock market entering “bubble territory” for the first time since 2018, with the ongoing inflation of the US dollar.

DeFi Rules

In parallel to Bitcoin, there has been a recent surge in popularity in the decentralized finance (DeFi) industry, with DeFi altcoins outperforming BTC. Chainlink (LINK) and Band Protocol (BAND) have both witnessed double-digit gains, with LINK altcoins reaching an all-time high on Binance, capping at $14.0551, and reaching fifth place on CoinMarketCap.

Tesla Stock and Bitcoin Rebound with S&P 500, But Bitcoin Price and Crypto Crash Still Predicted

Tesla and Bitcoin’s price have both made significant recoveries over the last 24 hours, however, our chart analysis indicates that a Bitcoin and crypto price crash is still a very real possibility for September.

Tesla’s price has surged over 10% following a 21% plunge on Wednesday. Meanwhile Bitcoin has also made a price recovery of nearly 5% amid the crypto market downtrend—is the simultaneous recovery of BTC and Tesla a coincidence or is there a connection?

Tesla Stock Rebounds, BTC Surges

On Sept 9, the Tesla price dropped by 21% in what investors deemed a terrible trading day, with the tech giant suffering its biggest drop yet. The sudden drop saw Tesla stock lose around 33.7% of its 2020 gains, falling from grace from a high of $498.32 in the past week. The drop also saw Elon Musk’s personal net worth fall by $16.3 billion.

Later that day, Tesla made a recovery, surging 10.92%. Bitcoin which had fallen into the crypto market downtrend and appeared to be consolidating at around $10,000 also surged 5% through the resistance point.

According to reports, there were clues that the Tesla stock would undergo a massive sell-off. One of the indicators was when investment management firm Baillie Gifford, a long-time shareholder of Tesla stock, sold its shares and cashed out its gains at the same time as the electric car and battery maker’s stock hit a record high.

An obvious reason the Tesla price plunge was that the entire United States stock market has been correcting on a downtrend.

Source: Skew.com

The downward trend and recovery of the overall stock market is also likely a factor for the Bitcoin prices as on data from Skew shows the 1-month correlation between Bitcoin and the S&P 500 has increased significantly from 18% to over 50%.

Tesla’s S&P 500 ExclusionAccording to Baird analyst, Ben Kallo, Tesla’s stock most likely fell as many investors were anticipating that Tesla’s stock would be included in the latest S&P 500 release. The analyst explains that when the anticipated Tesla inclusion did not occur, it was a catalyst for a massive investor sell off. The popular analyst believes the “shares were reflecting expectations for substantial passive inflows.”

Kallo said:

“We think the stock could be under pressure following the delay of S&P 500 inclusion, particularly from investors who bought ahead of the announcement expecting an opportunity to sell to passive funds.”

The connection between the Tesla stock and BTC price appears to be mainly due to Bitcoin’s increased correlation with the S&P 500. If anything, the behavior of Bitcoin is a stark reminder that all financial markets remain fragile in the COVID pandemic market climate and BTC is still being liquidated by investors during vulnerable periods similar to tech stocks and other risk-on assets.

Bitcoin Price Still Likely to Crash in September

Our own analysis, however, indicates that despite Bitcoin recent sure, the BTC price is due to crash to around the $8,000 mark in the coming weeks in a major correction, before continuing on its macro bull trend.

Source: Trading View

The Bitcoin price surged through to around $10,418 before correcting to around the $10,300 mark. As displayed above in the 1-hour chart, the Bitcoin price continues to move within the horizontal channel, consolidating around the $10,000 resistance—which it has done since its price crashed on Sept 2 and 3. Each time BTC has touched the top of this horizontal channel it drops, which is not a good indication that Bitcoin will move in am upward direction.

Source: Trading View

The Bitcoin price went up to challenge the 5-day MA, but 5-day MA is still acting as a strong resistance level. Also, the BTC price’s interactions with the 90-day MA indicate this line has become a strong resistance, leading the Bitcoin price to fluctuate below the 90-day MA more frequently.

As reported by Blockchain.News, US-based crypto exchange Kraken’s August 2020 volatility the report also indicates that Bitcoin is due for a very negative performance in September that could see the pioneer crypto’s price crash before returning to a state of extreme volatility.

Could Stock Market Turbulence and US Elections Send Bitcoin Crashing Down?

Bitcoin’s price has plunged from highs of more than $11K to lows of $10,400 in recent days, and analysts have looked at US stock markets to explain the cryptocurrency’s price dip.

Bitcoin has been trading alongside traditional markets for weeks, according to US stock analysts. Though the cryptocurrency has recorded significant bull runs this year, with an impressive surge past the $12,000 level in August, it has failed to break its resistance level of $11K lately.

Bitcoin volatility makes it less attractive to investors

Analysts have directed their attention towards stock markets to explain the consolidation around the $10K level of Bitcoin.

With the global economy at a downtrend due to COVID-19 and the US dollar depreciating, indications seem to be that investors will adopt Bitcoin (BTC) and other cryptocurrencies more as a hedge. BTC has in recent months been continuously touted as a safe-haven asset by many Bitcoin whales, such as the Winklevoss twins and even traditional institutions like Microstrategy.

However, market experts have revealed that due to Bitcoin’s volatility, some investors have been more hesitant in adopting Bitcoin and storing their assets with the “digital gold” cryptocurrency, going against the “safe-haven narrative” advocated by Winklevoss.

In addition, with the US elections approaching, analysts at investment banking giant Goldman Sachs have predicted that high volatility would be observed on markets, with “price swings that will stay elevated until early 2021.” They added that the volatility will likely occur after the November US presidential election, rather than before. Goldman Sachs strategists said:

“The level of implied volatility sends a clear message: The election matters for equities and the outcome is highly uncertain.”

Instability of traditional markets impacts BTC

Market analysts have also suggested that it may be a couple of years before Bitcoin completely decouples from traditional markets. Therefore, if stock markets are to experience high volatility, it may translate to similar movements for Bitcoin, which may not be a selling point for new investors.

It has been observed in the past that when traditional stock markets were bearish, Bitcoin was never able to rally and record groundbreaking price runs. Rather, BTC has been surging in tandem with stock markets for a while.

Therefore, given the recent turbulence and instability of stocks and equities, Bitcoin’s failure to break past its resistance level of $11K may be explained by its rally alongside unstable traditional markets.

Will Bitcoin fall to $9000? DeFi saves the day

A crypto economist, Alex Kruger, even predicted that Bitcoin would potentially fall to the $9000 level given that global economic uncertainty will remain a reality for a while. He said:

“Crypto traders best be careful with risk, as BTC could be pushed to the $9Ks in this chop (45 days to go) and hell would then break loose.”

Bitcoin is currently trading sideways at around $10,400 on the market. Though it has been bearish for a while, what has been considered a win for the cryptocurrency industry is the decentralized finance (DeFi) sector.

DeFi has been gaining significant momentum, with high rates of yield farming recorded by investors. Also, over $9 billion cryptocurrencies in total are locked into the DeFi industry at the time of writing, with leading unicorn giant Uniswap releasing its own token, UNI.

How Likely Will Bitcoin's Price Decouple from the Stock Market?

In times of economic uncertainty, Bitcoin has strongly correlated with the stock market. Recently, the stock market has faced a sharp sell-off, led by fears that the economy has yet to recover, and that there seems to be no end to the coronavirus pandemic.

Bitcoin has correlated with the recent dip in the stock market, as investors have been overwhelmed with fears of the lack of a second stimulus package in the US. Bitcoin struggled to rally while the stock markets were hit with chaos. Crypto economist Alex Kruger expects Bitcoin to potentially fall to $9,000 amid the current global economic uncertainty.

Apart from the COVID-19 induced stock market stress, uncertainty over the contest, and delays of the upcoming US presidential election could also be a factor for Bitcoin’s price to experience high volatility.

Bitcoin is currently trading at $10,452 at press time, the world’s largest cryptocurrency has been making moves sideways for the past 24 hours, and has been down 3 percent in the past week so far. As the stock market crashed on Monday, Bitcoin dipped from $10,977 to $10,400 within a few hours. The lack of any developments regarding the economic stimulus could continue to drag Bitcoin lower.

Market analysts have previously suggested that it would take a couple of years before Bitcoin completely decouples from the traditional markets, however, an analyst has another point of view. The on-chain analyst suggested that the stock market decline will eventually stop pulling Bitcoin’s price lower and that BTC could break the correlation with the stock market and potentially rally higher.

Bitcoin and the stock market decoupling?

While data suggests that there is a strong correlation between Bitcoin and equities, crypto analyst Willy Woo explains that if a massive stock market crash occurs, Bitcoin and the stock market will eventually break its correlation. Regarding the recent Bitcoin sell-off, he said, “This pullback from what I gather looking on-chain took most spot investors off guard, there wasn’t the usual on-chain activity preceding it. Sell off happened at exchanges only. Stocks correlation pulled BTC down its bullish week of breaking free from Stocks.” He added:

“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.”

Why is the Bitcoin Price Correlation with the Stock Market Currently High?

It is important to understand Bitcoin’s correlations with the US dollar and traditional assets, then find a rule in the relationship, so we can predict the Bitcoin market by observing the performance of other markets, like stocks and gold.

Recent Stock and Crypto Market Bull Run Driven by Unlimited QE

There is no doubt that Bitcoin (BTC) and the overall crypto market has some correlation with the stock market, with market experts remarking that Bitcoin has been surging in tandem with traditional markets for awhile. Extensive research has already been conducted by market experts to study the seeming correlation of both markets.

In the article, we use a simple holistic method to observe the Bitcoin and crypto market correlation with the stock market movements of this year.

Nasdaq fell to 6,686.36 – its one-year low on March 18; The Dow Jones Industrial Average fell to 19,094.27, its one-year low on March 20; S&P 500 fell to 2,191.86, its one-year low at March 23. During this period of the COVID-19 market crash, Bitcoin also crashed to $3,800m its lowest point for the year on March 13 with Ethereum falling to its own yearly low of $86 on the same day.

On March 23, the day S&P 500 plunged to its low, was the day the most influential thing which occurred for the market. The Federal Reserve announced unlimited QE and set up several new lending programs, which meant enough money would be provided to sustain the market without boundaries or limits. The new money supply and its expectations have become the most important factor for both the stock and crypto markets which tend to rise when liquidity is made freely available.

Since then, both the stock market and the crypto market started a bull run. On Sept 2, the S&P 500 and Nasdaq reached a record high and on Sept 3, the Dow reached a record high. Ethereum reached a 2-year high on Sept 1. Bitcoin however was a bit different which reached a 1-year high on Aug 17, but this was influenced heavily by the announcement of MicroStrategy choosing Bitcoin as its primary reserve currency and investing $250 Million into the cryptocurrency.

It seems that the crypto market has now become even more sensitive to monetary policy, maybe due to the whole crypto market is much smaller than that of the stock market. Although crypto market performance can hard have an influence on the stock market, stock traders need to be aware of the more sensitivity of the crypto market. This can be an affiliated factor to observe.

Bitcoin and Cryptos as assets

Well, to understand the logic of Bitcoin and Cryptos as assets, we need to have an understanding of how our financial world currently operates.

The US dollar is the de facto world currency, thus the value benchmark for everything else, including assets and other fiat currencies. Lots of financial activities are based on US dollars like loans and settlements, which no doubt increase requirements and adoptions of US dollars (In a negative word, US dollar colonization). When the world lacks a supply of US dollars, everything else will fall in price in reference to US dollars. If the US dollar is stable, then the crypto prices may have become influenced by the monetary policies of other currencies. For example, there is very high inflation in Argentina, so the general public would like to exchange their Argentine pesos for Bitcoin, to reduce the risk of inflations.

Although Bitcoin and other cryptocurrencies can function like currencies, like payment and store of value, the market cap of cryptocurrencies is quite small compared to traditional finance, and most financial activities are based on fiat money. After all, you can’t borrow Euro, then pay back Ethers. Typically you need to pay back Euro. In other words, the financial inclusion of cryptocurrencies is not enough. If bitcoin and other cryptocurrencies replace more traditional financial functions, which may reduce the role of the US dollar and other fiat money, the relationships between Bitcoin and other fiat money will be different.

Daily price analysis of recent days

In recent days, the Bitcoin and crypto market correlation with the stock market is apparent.

On Sept 23, the S&P 500, Dow and Nasdaq each had their worst day in two weeks, S&P 500 closed at the lowest level since July. On Sept 23 Tesla stock dropped 10.34%, the Bitcoin price dropped around 2.4% while Ethereum price dropped around 7%.

On Sept 23, The S&P 500 rose 0.3%, the Dow rose 0.2% and Nasdaq rosed 0.37%. While Tesla stock rosed 1.95%, Bitcoin rosed around 5% and Ethereum rosed around 9%.