Discover the Close Relationship Between Bitcoin and the Nikkei Index
Did you know that there are striking similarities between the Nikkei index and the price of bitcoin? According to Mike McGlone, a senior commodity strategist for Bloomberg Intelligence (BI), these two seemingly unrelated entities have a close directional relationship.
In a recent report by Bloomberg Intelligence, McGlone delved into the question of whether the Nikkei index or the Nikkei Stock Average (Nikkei 225) serves as a guide for bitcoin, or if it’s the other way around. McGlone revealed:
Bitcoin has been closely correlated with the Nikkei 225, and the recent weakness in the crypto market could indicate a contagion effect. Alternatively, bitcoin may recover and follow the trajectory of the Nikkei, which reached a 33-year high in June.
McGlone emphasized the importance of considering bitcoin as a leading indicator and paying attention to the downward-sloping 100-week moving average. He stated, “If bitcoin can sustain a level above $31,000, it would signal strength in its recovery. However, we have valid reasons to believe that the downward trend will continue due to tightening policies by the Federal Reserve and most central banks.”
Moreover, McGlone suggested the possibility of the Nikkei tracking bitcoin’s downward trajectory. He explained that Japan’s proximity to China, coupled with deflationary implications and similarities to historical events, may contribute to the Nikkei following bitcoin’s decline.
In analyzing bitcoin’s price trend, McGlone observed a potential resumption of the downtrend since its peak in 2021. He emphasized the significance of the $30,000 level as a key pivot point. While surpassing this level could indicate a reversal similar to the pattern observed in the second quarter of 2020 at $12,000, the strategist highlighted the difference in liquidity conditions this time, with most central banks tightening policies and increasing rollover risks for the stock market.
Hot Take:
The close relationship between bitcoin and the Nikkei index reveals an intriguing interplay between the crypto market and traditional stock indices. As investors, it’s essential to observe these correlations and consider them while making informed decisions. Whether bitcoin influences the Nikkei or vice versa, understanding their interconnectedness can provide valuable insights into market trends and potential contagion effects.
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