Bitcoin is trading at a record high on Monday, up 6.35% at $4,362 a coin.
Over the past month it has added almost 100%, rejecting all the fears that a fork in the cryptocurrency would cause huge selloff.
And today we are going to touch upon very interesting issue. if just a couple of years ago there were big problems to analyze the Bitcoin moves without any history, now we have a basis to compare and to find some correlations.
Observation #1
The history shows that huge gains in bitcoin often coincide with stronger demand on stocks. For example, the Dow Jones Industrial Average added 1.56% during the recent month, and the Nasdaq rose 0.37%.
Moreover, out of the 18 previous instances when bitcoin appreciated at least 30% a month, the S&P 500 was higher 15 times with 2 months lag and 17 times with 3 months lag, showing average gains of 3.61% and 4.66%, respectively.
Of course the history not always means we are going to see the same in future, but the conclusion based on such correlation is quite logical – the market interest to cryptocurrency shows the sentiment for more riskier assets. And it means we could use the Bitcoin dynamics as a leading indicator of future stock direction.
Observation #2
The history shows whenever there is a risk to see a capital control in one of the countries, the demand on cryptocurrencies grows faster than ever. We saw it with Cyprus when in March and April, 2013, the value of Bitcoin spiked by almost 700% when capital controls were introduced in the country, reducing the amount which bank clients could withdraw from their accounts.
The same was with Greece under the risk of leaving euro zone, and with China under the risk of capital controls. Many Chinese people are now using cryptocurrency as means to transfer large amounts of their yuans abroad, into other foreign currencies.
And there are more correlations in store, as we just only starting to get some history to analyze.
Over the past month it has added almost 100%, rejecting all the fears that a fork in the cryptocurrency would cause huge selloff.
And today we are going to touch upon very interesting issue. if just a couple of years ago there were big problems to analyze the Bitcoin moves without any history, now we have a basis to compare and to find some correlations.
Observation #1
The history shows that huge gains in bitcoin often coincide with stronger demand on stocks. For example, the Dow Jones Industrial Average added 1.56% during the recent month, and the Nasdaq rose 0.37%.
Moreover, out of the 18 previous instances when bitcoin appreciated at least 30% a month, the S&P 500 was higher 15 times with 2 months lag and 17 times with 3 months lag, showing average gains of 3.61% and 4.66%, respectively.
Of course the history not always means we are going to see the same in future, but the conclusion based on such correlation is quite logical – the market interest to cryptocurrency shows the sentiment for more riskier assets. And it means we could use the Bitcoin dynamics as a leading indicator of future stock direction.
Observation #2
The history shows whenever there is a risk to see a capital control in one of the countries, the demand on cryptocurrencies grows faster than ever. We saw it with Cyprus when in March and April, 2013, the value of Bitcoin spiked by almost 700% when capital controls were introduced in the country, reducing the amount which bank clients could withdraw from their accounts.
The same was with Greece under the risk of leaving euro zone, and with China under the risk of capital controls. Many Chinese people are now using cryptocurrency as means to transfer large amounts of their yuans abroad, into other foreign currencies.
And there are more correlations in store, as we just only starting to get some history to analyze.