Since the pandemic reached considerable levels, markets have experienced interesting phenomena. In the case of Bitcoin, this crisis has challenged its characteristic of reserve asset, due to the correlation it has with the stock markets and stocks.
Relative Strength Index (RSI) readings show that Bitcoin’s slide is more severe than stocks. The currency fell 8.3% in September, the worst drop since it had in March.
Stocks and Bitcoin: How Much Correlation Is There?
After it was announced that Donald Trump tested positive for coronavirus, stocks fell. Contrary to what many would expect, Bitcoin also experienced a pullback.
This is because the correlation between Bitcoin and the benchmark S&P 500 stock index remains positive, which means that their price movements are consistent with those of the stock markets.
Furthermore, Bitcoin’s 14-day Relative Strength Index (RSI) reading sits at 45, while the equity index is at 51. That suggests that the cryptocurrency’s decline has been more severe than the overall market decline. of values.
The S&P 500 is down 6% from its September high, while Bitcoin is down 15% from its mid-August peak.
What factors may be influencing this phenomenon?
Bitcoin’s correlation with stocks was in evidence during Black Thursday in March, but now it appears to be continuing. Some factors may be the expectations around the US elections, and the financial stimuli that continue to take place in the world due to the pandemic.
Therefore, it appears that Bitcoin is not fully fulfilling its narrative of being a reserve asset in times of crisis. The currencies of pairs like Bitcoin Cash, Dash, Litecoin and Monero also decreased in price.
Although Bitcoin has rebounded since its spring slide and gained around 50% this year, it remained in a tight range for almost a month. The coin comes off a difficult September, in which it lost 8.3%. That was his worst month since markets collapsed in March at the start of the pandemic.
On the other hand, there are experts who always highlight the fact that Bitcoin has a limited supply, unlike traditional fiat currencies. So whatever happens, it has an appreciation bias.
The current context remains complex worldwide, and although Bitcoin may not be having the results that many expected, its performance is not negligible worldwide. It is a matter of actively monitoring its evolution for the remainder of the year.