Cryptocurrencies are not traditional investment vehicles, but a case can be made that crypto markets have more upside in the near term than the S&P 500. While the major indices fell on Monday, the latest drop in a continued selloff since late last week, cryptocurrency Bitcoin remained unchanged. Could this be a sign that the bottom is in and more upside remains?
This year, Bitcoin has traded similarly to US stocks, falling and rising as the markets have. The correlation between stocks and the crypto king has weakened recently, as investors are showing that they are, in fact, invested in it. This de-coupling is noteworthy, and with major indices in bear market territory, it suggests Bitcoin will be a better place to park your money in Q3.
The S&P 500 has dropped nearly 9.5 percent in the past month, hitting its most recent peak of 4,110 on September 12. Since touching that mark, it has declined over 11 percent to 3,655. During that time, Bitcoin's price decreased by just 5 percent. Furthermore, while it is historically much more volatile, the crypto declined only roughly 0.5 percent more than the S&P 500 over the past three months.
The relationship between Bitcoin's long-term holders and this noticeable trend cannot be understated.
“At some point, the market will be controlled by those in the community that are long-term believers in BTC and very unlikely to sell and the growing global community which use BTC for commerce,” Stephane Ouellette, chief executive of FRNT Financial Inc., recently told Bloomberg. “When the latter participants control the market, one would expect correlations with risk assets to break down and BTC to ‘start trading in its own world’ as I believe we are seeing now.”
As Bitcoin trades in a tight range above the psychological $19,000 level, we may have seen its recent bottom around $18,500. Down nearly 60 percent this year, the cryptocurrency's anemic performance in recent weeks is a marked improvement. In the past, for example, when the S&P 500 dropped two percent, you could expect Bitcoin to be down seven or eight percent.
While only time will tell how long this trend lasts, its future might not be as bleak as some previously suggested. Take it with a grain of salt, but the "HODLers" could be onto something.
This year, Bitcoin has traded similarly to US stocks, falling and rising as the markets have. The correlation between stocks and the crypto king has weakened recently, as investors are showing that they are, in fact, invested in it. This de-coupling is noteworthy, and with major indices in bear market territory, it suggests Bitcoin will be a better place to park your money in Q3.
The S&P 500 has dropped nearly 9.5 percent in the past month, hitting its most recent peak of 4,110 on September 12. Since touching that mark, it has declined over 11 percent to 3,655. During that time, Bitcoin's price decreased by just 5 percent. Furthermore, while it is historically much more volatile, the crypto declined only roughly 0.5 percent more than the S&P 500 over the past three months.
The relationship between Bitcoin's long-term holders and this noticeable trend cannot be understated.
“At some point, the market will be controlled by those in the community that are long-term believers in BTC and very unlikely to sell and the growing global community which use BTC for commerce,” Stephane Ouellette, chief executive of FRNT Financial Inc., recently told Bloomberg. “When the latter participants control the market, one would expect correlations with risk assets to break down and BTC to ‘start trading in its own world’ as I believe we are seeing now.”
As Bitcoin trades in a tight range above the psychological $19,000 level, we may have seen its recent bottom around $18,500. Down nearly 60 percent this year, the cryptocurrency's anemic performance in recent weeks is a marked improvement. In the past, for example, when the S&P 500 dropped two percent, you could expect Bitcoin to be down seven or eight percent.
While only time will tell how long this trend lasts, its future might not be as bleak as some previously suggested. Take it with a grain of salt, but the "HODLers" could be onto something.