bitcoin price drop

It is extremely clear that there is a high level of correlation between bitcoin and the stock market on Wall Street. According to a new report “On a 90-day basis, the correlation between the daily percent returns of the cryptocurrency and the S&P 500 is 33 percent, the highest since the cryptocurrency started gaining public attention in January 2016.” The previous high of the last two years was only at around 19%, which is much lower.

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The long run shows a negative 1% correlation, which means that these industries are highly correlated. The correlation factor has been increasing substantially, which means that many investors have possibly switched investments between crypto and the stock market. Towards the end of December, bitcoin managed to surge above $19,000, leading it to the highest the price had been since the coins inception. After the announcement of futures contracts from CME and its competitor CBOE, bitcoin managed to drop substantially, which many see as a fraudulent drop in the price, controlled by a select few individuals.

The issue with this lies in the fact that many got into the crypto industry only so that they could find an alternative to the stock market. If bitcoin is following that same price action, it essentially defeats the purpose of investing in bitcoin instead of stocks. As the stock market took its most recent dip, bitcoin also dipped below $6,000. This price action scared many investors, which led to quite a large selloff across both industries. As the industry on cryptocurrency is still relatively in its infant stages, many investors are hoping that this tight correlation will slow down slightly, so both markets can continue to grow independently of one another. Only time will tell what happens to the industry on crypto.

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