A Simple Observation...But Is It A Trap?
Although crypto and stocks have moved together a handful of times, we can see a divergence on this chart. The Dow Jones made a lower low while the cryptocurrency market valuation made a higher low in the same timeframe. Additionally, after the bounce, cryptocurrencies are now higher than they were at their low point in December, 2019. Stocks are barely above the lows from December, 2018. One could say that they're "correlated" in the sense that they have moved in tandem recently (recent price action sure looks similar), but if you look at overall performance, crypto has simply continued to trend sideways, while many stocks have crashed or entered severe bear markets. It should be noted that many tech stocks are doing well, which could mean that the crypto market picks up some of its momentum from that sector.
Of course, the timeframe here fits a certain bias. You could still say that crypto has far underperformed since the beginning of 2018. Most are still over 90% down from their peaks. I'm using a more recent timeframe because thats what I think investors will pay attention to. It's a really important moment for cryptocurrencies. The fact that they have shown more resilience than global markets is quite impressive, but there is such little liquidity in crypto that perhaps that's why it has been largely unaffected. Not enough risk exposure for big money, so any big players who own cryptocurrencies wouldn't bother selling at these prices. This is possible. On the other hand, we should keep tabs on this relationship, because if crypto decides to make a NEW low as stocks do the same, it should tell us that Bitcoin and its friends can no longer be used as any sort of experimental hedge. I say experimental because that's what it is.
Another observation. Here is the ratio of Bitcoin to the S&P 500 index (both against the Dollar). I used Bitcoin here because it has a longer price history than TOTAL, which I used for the main chart.
It's in a giant triangle that seems to be nearing completion. Currently, Bitcoin is below the triangle support, but buyer behavior is strong, and we have a potential bullish fractal (circled in yellow). Here it is zoomed in:
If Bitcoin can get back into that triangle, things could get very interesting.
Just a couple of simple things I'm keeping an eye on amidst all this chaos. This is not financial advice.
-Victor Cobra
Of course, the timeframe here fits a certain bias. You could still say that crypto has far underperformed since the beginning of 2018. Most are still over 90% down from their peaks. I'm using a more recent timeframe because thats what I think investors will pay attention to. It's a really important moment for cryptocurrencies. The fact that they have shown more resilience than global markets is quite impressive, but there is such little liquidity in crypto that perhaps that's why it has been largely unaffected. Not enough risk exposure for big money, so any big players who own cryptocurrencies wouldn't bother selling at these prices. This is possible. On the other hand, we should keep tabs on this relationship, because if crypto decides to make a NEW low as stocks do the same, it should tell us that Bitcoin and its friends can no longer be used as any sort of experimental hedge. I say experimental because that's what it is.
Another observation. Here is the ratio of Bitcoin to the S&P 500 index (both against the Dollar). I used Bitcoin here because it has a longer price history than TOTAL, which I used for the main chart.
If Bitcoin can get back into that triangle, things could get very interesting.
Just a couple of simple things I'm keeping an eye on amidst all this chaos. This is not financial advice.
-Victor Cobra
Comment:
Things are getting interesting now. Crypto has remained relatively strong/stable while stocks are showing signs of weakness (declining OBV during the recent rally). Now back above this theoretical support line.
