7 October 2022
The crypto market has witnessed a surprise bounce. The leading cryptocurrency, Bitcoin, has rallied from the $18K-$19K range to cross the $20K mark. In the last 24 hours, the value of Bitcoin surged by 5% and is currently trading at $20.1K. However, since the stock markets are dumping, Bitcoin looks to break the correlation.
The second leading crypto, Ethereum also witnessed a strong rally for the first time after the merge. Ethereum gained 6% in the last 24 hours and is set to cross the $1.4K mark.
Other altcoins are also trading in greens- Solana (+7%), Polygon (+5%), and Terra Classic (+56%).
While the crypto market is trading in the green, the stock market has experienced a sell-off. S&P 500 fell by over 1% while NASDAQ-100 fell by 0.5%. The crypto market is strongly correlated with the broader market.
According to Coinbase research, the crypto is correlated with the traditional market with a beta of 2. It somehow behaves close to the tech stocks and the tech-oriented NASDAQ. Before 2020, there was no correlation between the two. For Bitcoin to work as an inflation hedge, it must consistently perform despite a sell-off in the broader market.
Although, a major crypto influencer, Kevin Svenson believes that Bitcoin is still dependent upon the stock market. Lesser speculation than the S&P 500 is the reason for Bitcoin’s bounce back. Svenson reveals that just as crypto did not bounce back as fast as S&P 500, it is not dumping as fast either.
Currently, the dollar’s rally has come to a halt which caused the crypto’s strong showing. Svenson believes that Bitcoin bulls will hope that the stock market rallies as well. Otherwise, crypto is doomed to fall again.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice