Yesterday, US equity markets had a red day, as cryptocurrency prices are showing some signs of life this week. Is this the beginning of the stock-crypto decorrelation? We take stock.
US stocks uniformly in the red yesterday
In the single day yesterday, US stocks saw $860 billion soar, with consequent drops. Amazon (AMZN) thus lost -4.75%, Alphabet (GOOG) plunged by -3.74% and Apple (AAPL) by -3.70%:
JUST IN: Over $860 billion was wiped out from the US stock market today. pic.twitter.com/IqFNv4qFxG
—Watcher.Guru (@WatcherGuru) November 2, 2022
Markets reacted to Jerome Powell’s announcement. The Chairman of the Federal Reserve announced yesterday that the Central Bank raised its rates to their highest level in fifteen years. It also plans to continue to raise themreviving recession fears.
With a direct effect on the stock markets. At the close yesterday, the Dow Jones posted -1.55% and the NASDAQ fell -3.39%. But Captain Powell remained firm: for him, the US economy is not yet in recession.
“[Une récession] is a broad decline across multiple industries that is sustained for more than two to three months. It does not look like what is happening now.»
An analysis of course debatable, but which shows that the Fed is in dire straitsin the face of a macroeconomic situation that is anything but appeased.
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Cryptocurrencies (finally) uncorrelated?
If the Fed Chairman pulled out the oars, and if the equity markets reacted particularly negatively, this is not the case for cryptocurrencies. This week, the price of Bitcoin (BTC) seems determined to sustainably cross the psychological threshold of 20,000 dollars. What to see there a beginning of decorrelation?
Price of Bitcoin (BTC) VS S&P 500 and NASDAQ
Looking at the correlation of BTC and Ether (ETH) with specific stocks, we see that the ratio has gone down, strongly for some. As a reminder, a ratio equal to 1 indicates a perfect correlation. Conversely, a negative ratio indicates remoteness:
Why is this possible correlation so much observed? Because it is of the value proposition carried by cryptocurrencies. That is to say, to offer assets not linked to traditional markets. In fact, it has historically been more complicated than that. In recent years in particular, Bitcoin and stocks have tended to move in tandem, with cryptocurrencies falling when equity markets plunge.
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Cryptocurrencies that no longer move in tandem with stocks?
But that would be changing, according to several analysts. Yesterday’s dive tends to confirm this, in addition to some cultural change in the ecosystem. In any case, this is what analyst Simon Peters suggested to our colleagues from The Motley Fool:
“The proportion of wealth held in coins that have moved in the past three months is now at a historic low. […] Wealth held in coins that haven’t moved in more than three months is now at a record high.»
The “HOLD” therefore seems to dominate. The reason is that the fall of Bitcoin “purged” holders who were inclined to sell. Apart from minors, investors generally have no interest in selling at this price level. This means they are holding onto their BTC even as equity markets may take a dip.
Will we then see the advent of cryptocurrencies as a store of value in the face of falling stocks? It is still far from being confirmed, but the events of this week show that the scenario is possible.
👉 Also read – NASDAQ is about to launch a cryptocurrency management fund
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Source: IntoTheBlock, TradingView, BTC/USDT
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Journalist at Cryptoast, I fell into the pot of cryptocurrencies a few years ago. I am passionate about the innovative technologies that stem from the blockchain and I like to find the most crispy information to share with you.
Marine Debelloir
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