Bitcoin Extends Pullback As Correlation With Stocks Tightens


It would appear that the stock market and Bitcoin (BTC) are moving in tandem once again.

On Friday, April 22, Bitcoin plunged more than 6% to $39.700- the midpoint of a three-month long trading range, as the US stock indexes also fell.

The S&P 500 lost 122 points, or 2.77%, to end the session at 4,271 points, while the Nasdaq Composite lost 335 points, or 2.55%, to 12,839. The Dow Jones plunged 981 points, or 2.82%, to 33,811.

The correlation between the flagship cryptocurrency and the S&P 500, Dow Jones, and Nasdaq 100 has been on the rise in recent months. And based on recent Dow Jones market data this trend is continuing.

The two-month rolling correlation coefficient between BTC and the S&P 500 index rose to 0.53 on Friday. This is the highest level since Jan. 24- suggesting the two assets are moving more in sync than typically expected. A coefficient close to 1 would indicate a strong relationship between the assets.

Additionally, this trend is likely to continue as investors seek to diversify their portfolios and protect themselves from downside risk. Bitcoin is seen as a hedge against inflation and a potential safe haven in times of economic uncertainty.

“We generally have market headwinds across pretty much all macro. Stocks, gold, oil, crypto, all had a pretty rough week,” Chris Kline, chief operating officer and co-founder of Bitcoin IRA told MW in an interview. “There’s a general understanding that the free money party may be coming to an end,” Kline said.

The world’s largest cryptocurrency by market cap, has been trading in the range of $38,000 to $48,000 for the past month. “I would anticipate that we’re still gonna be in this range bound,” Kline said. “It’s happening across multiple markets.”

Bitcoin hit an all-time high of nearly $69K last November, and has since been in a downtrend. The apex cryptocurrency has support at $37,500 with the 100-week moving average, currently at $35,700. A break below $35,000 could see the cryptocurrency test the $30,000 level.

The cryptocurrency market is still in its early developmental stages and is highly volatile. Bitcoin’s correlation with stocks may be a sign that the two markets are starting to become more intertwined. As institutional investors enter the cryptocurrency market, this volatility is likely to continue.

Disclaimer: The information provided is not trading advice

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