In This Article:
Volatile price swings and plummeting valuations have been a reality for bitcoin investors of late, but those who own traditional equities haven't been immune either.
In fact, bitcoin and the S&P have correlated on and off for almost a year, each taking turns as the leading indicator. Bitcoin, the cryptocurrency advertised as digital gold due to its difficult means of production and limited supply, is expected by some to act as a "safe haven asset," one that rises or remains stable in times of economic turmoil (just as its metal companion traditionally has).
To date, though, rarely has that been the case.
CFTC Chair Giancarlo Says Institutional Investors Will Help Crypto 'Mature'
Since Oct. 10, both bitcoin and equities markets have taken a notable plunge, and interestingly enough, to around the same degree. The S&P 500, the benchmark for equities worldwide, at its lowest point of the day of $2,710 market a 5.69 percent loss from the opening price of the day prior.
Similarly, bitcoin's low yesterday of $6,205 marks a similar 6.7 percent depreciation from the opening prices two days ago, according to data from Binance.
The respective performances suggest bitcoin is behaving like a risk asset rather than a safe haven alternative â a claim backed up by their technical charts.
A look at the charts
3 Bitcoin Price Factors That Suggest Bears Are in Charge
The daily chart comparison between the S&P 500 Index (SPX) and BTC shows a similar correlation in price action and direction, with a notable dip in both markets in September and October.Â
It has often been the case that as bitcoin gains in value, so too does the SPX, and vice versa, providing an indication on the status of investor sentiment worldwide.
Observing the end of September for bitcoin, we see how prices peaked and sharply fell as the month of October rolled around, the SPX also retraced around the same time.
The first indications for bitcoin's most recent breakdown appeared on the SPX on Oct. 4-5, demonstrated by the peak in price and a bearish 3-candlestick breakdown that triggered a sharp sell-off. Bitcoin followed suit a day later after printing a similar bearish candlestick on both charts.
So, for now, it seems as though the SPX is providing signals for the bitcoin market a day or so in advance.
Bitcoin as a risk asset
Risky assets are the ones that have a significant degree of price volatility and do not offer fixed returns. Further, the prices of these assets tend to rise when the domestic and global economy is growing.