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Bitcoin Stock Market
Nexo

Bitcoin May Remain Stagnant For Months, Stock Market Correlation Shows

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin, Bitcoin Price
0

Following the ruthless volatility experienced throughout the first quarter of the year in the stock market and Bitcoin, the recent price action has been boring by comparison.

However, according to past the price action during previous recessions and a tight correlation with the stock market, Bitcoin price could remain stagnant and trade at these levels for many months to come.

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Bitcoin Price Action Gets Boring After Record-Breaking Volatility Last Month

At the start of the year, Bitcoin price exploded from lows around $6,800 to above $10,000 in just two months time. The leading cryptocurrency by market cap failed to hold the key level, delivering a fatal blow to bulls who had been buying up the asset in anticipation of the upcoming halving just three weeks from now.

The event had long been expected to be bullish, but a fall to below $4,000 and a retest of Bitcoin’s bear market bottom range has left crypto investors shaken and sentiment in the toilet.

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The cryptocurrency fear and greed index has reached the longest stretch of extreme fear in the history of the tool, and with the coronavirus still out of control and an economy on thin ice, another drop has been expected.

However, Bitcoin price recently has been showing a strong correlation to the stock market, which helped take the crypto asset down to the lows set on Black Thursday last month. That same correlation, however, could have Bitcoin price stagnant for many months ahead.

15/ One possible scenario: $SPX could range around here for months.

This could be the level where the law of gravity meets The Man behind the curtain.

Fed could keep things floating here awhile. pic.twitter.com/w6YhkVhlkV

— Cole Garner (@ColeGarnerBTC) April 22, 2020

Tight Correlation With Stock Market Could Leave Cryptocurrencies Stagnant for Months

According to charts shared by Cole Garner, self-proclaimed crypto analyst and market cyclist, during the Great Depression, the S&P 500 suffered a catastrophic collapse. The fall caused the asset to bounce to the 23% retracement level. The same stock market index is now currently at 15% retracement, which could be enough to satisfy a dead cat bounce rally before a deeper dive lower.

Such a move also could take Bitcoin price down to new lows, as the asset has been more correlated now to the stock market than the rest of the asset’s history.

RELATED READING | OMINOUS BITCOIN PRICE FRACTAL REVEALS REPEAT OF RECORD SELLOFF

But that’s not the only scenario. The max pain scenario – the one that would cause investors and traders the most grief – would be the current Bitcoin price action continuing in this range for another few months, before the fall finally happens.

What could be happening for now, is that traders are currently taking positions preparing for a move higher or lower. Because there’s so much uncertainty both sides could be equally matched, causing the price to ping pong in a tight trading range. The range won’t break until both sides give up, and one overtakes the other and a breakout occurs.

But that may be months away, according to the analyst’s take.

Featured image from Pixabay
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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