The Influence of Stock Markets on Bitcoin’s Price
These days, the stock market has been impacting the price of Bitcoin to some extent. However, it’s important to note that not all stock markets are moving in the same direction, resulting in both positive and negative influences on Bitcoin.
The US Stock Market and Bitcoin’s Price
Yesterday, there was a clear example of how the opening of the US stock market affected the price of Bitcoin. Initially, Bitcoin’s price rose from $26,200 to $26,800. However, as trading commenced on the New York Stock Exchange, Bitcoin’s price began to decline. This drop occurred simultaneously with a 1.2% decrease in the S&P500 stock index within four hours. Consequently, Bitcoin’s price fell from $26,800 to $26,000. Fortunately, the US stock market rebounded later, leading to a recovery in Bitcoin’s price to $26,500.
The Chinese Market
A similar situation unfolded when Asian exchanges opened. The Hang Seng Index of the Hong Kong Stock Exchange experienced a 1.2% loss within two hours of opening. As a result, Bitcoin’s price dropped from $26,500 to $26,300. However, this descent was less severe compared to the previous day as Bitcoin did not return to $26,000. Subsequently, while the Hong Kong stock exchange continued to decline slightly after a brief rise, Bitcoin’s price remained stable at around $26,400.
Therefore, today it can be concluded that Chinese exchanges only partially influenced Bitcoin’s price.
The European Market
As European stock markets opened today, a similar scenario unfolded. However, while the London stock exchange experienced a 1% loss, the Frankfurt stock exchange only saw a 0.15% decrease, and the Paris stock exchange had a 0.30% decline (Milan experienced a -0.5% drop). Bitcoin’s price reacted with a slight dip below $26,400, demonstrating more resilience than the previous day.
Thus, it appears that it is primarily the US stock markets that have the greatest influence on Bitcoin’s price, with Chinese markets having only a partial impact and European markets exerting minimal influence.
The Medium Term
In the short term, the aforementioned observations hold true. However, in the medium term, the situation is different. Since reaching $25,000 on September 11, Bitcoin has accumulated a 5% gain. In contrast, the S&P500 stock index has lost 4%, while the Hang Seng has lost 4.5%. Over the past 30 days, Bitcoin’s price has risen by 1.5%, while the S&P500 and Hang Seng have seen declines of -3% and -3.2%, respectively.
These figures highlight that yesterday’s influence on Bitcoin’s price was an anomaly rather than a constant occurrence. It is worth noting that Bitcoin’s price trend does not consistently correlate with that of stock markets, except during certain periods. While there used to be a stronger correlation between the two trends until mid-August, recent weeks have shown Bitcoin holding up better than equity markets.
Bitcoin’s Strength: Price Correlation with Stock Market
However, it is important to recognize that Bitcoin’s current resilience since September 12 may not be sustainable in the long run, and its decorrelation from stock markets could change as well. Recent events indicate an increasing correlation over the past few days. Additionally, throughout the first part of 2023, there was a noticeable correlation, albeit with some exceptions.
The current weakness in equity markets juxtaposed with Bitcoin’s signs of strength could be attributed to the fact that crypto markets have already accounted for the inevitable weakness resulting from the bursting of the speculative bubble. Conversely, equity markets may not have fully experienced this decline yet.
Comparing current values with their 2021 peaks, Bitcoin has declined by 60%, while the S&P500 and Hang Seng have experienced declines of 10% and 40%, respectively. Furthermore, anticipation for the April 2024 halving, which will mark the beginning of Bitcoin’s new cycle, is growing stronger as it approaches.
None of these factors may directly impact equity markets, suggesting that their decline may not be fully resolved.
Hot Take: Bitcoin’s Price and Stock Market Correlation
The recent fluctuations in Bitcoin’s price and its correlation with stock markets have sparked interest and speculation. While there have been instances of correlation between Bitcoin and stock market trends, such as yesterday’s anomaly, it is important to recognize that Bitcoin has displayed resilience and strength in recent weeks compared to equity markets. The medium-term performance indicates that Bitcoin has outperformed stocks, accumulating gains while major indices experienced losses. However, it remains uncertain whether this trend will persist or if Bitcoin will once again align closely with stock market movements. As investors continue to navigate these dynamics, it is crucial to monitor both the crypto and stock markets for potential opportunities and risks.
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