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The stock market is influencing the price of Bitcoin

source-logo  en.cryptonomist.ch 28 September 2023 12:39, UTC

These days the stock market is influencing the price of Bitcoin at times.

However, it should be said that not all stock markets are moving in the same direction, so the influence turns out to be sometimes positive and sometimes negative.


The US stock market and the price of Bitcoin

Yesterday for example what happened after the opening of the US stock market was quite clear.

The price of Bitcoin had risen from $26,200 to $26,800, but as soon as trading began on the New York Stock Exchange it started to fall.

The S&P500 stock index had opened slightly higher, but then dropped 1.2% within just over four hours. During the same period, the price of Bitcoin fell from $26,800 to $26,000.

Afterwards, the US stock market made a good rebound, which reversed all the losses, and the price of BTC in the following hours slowly returned to $26,500.

The Chinese market

Tonight something similar happened after the Asian exchanges opened.

In particular, the Hang Seng Index of the Hong Kong Stock Exchange within two hours of the opening lost 1.2%, and the price of Bitcoin fell from $26,500 to $26,300.

Note how this descent was less than yesterday, as the price of Bitcoin did not return to $26,000.

Moreover, in the following hours the Hong Kong stock exchange lost an additional 0.15%, after a brief rise, while the price of Bitcoin went back up to $26,400 and then stayed there.

So today the Chinese exchanges were only half able to influence the price of Bitcoin.

The European market

Then another similar situation occurred as the European stock markets opened.

However while the London stock exchange is losing 1%, the Frankfurt stock exchange is losing only 0.15%, and the Paris stock exchange is losing 0.30% (Milan is -0.5%).

Bitcoin’s price reacted with a slight drop below $26,400, showing more resilience than yesterday.

This leads one to say that it is mainly the US stock markets that are influencing the price of Bitcoin, with the Chinese markets succeeding only partially, and the European markets succeeding very little.

The medium term

While all this is true in the short term, in the medium term things are different.

Taking as a reference point the $25,000 touched by the price of BTC on September 11, so far it has accumulated a 5% gain.

In contrast, the S&P500 stock index has lost 4% since then, while the Hang Seng has lost 4.5%.

If we extend the comparison to the last 30 days, since the end of August the price of Bitcoin has risen 1.5%, while S&P500 is at -3%, Hang Seng at -3.2%.

This highlights how the influence that occurred yesterday is not a constant, and indeed even seems to be an anomaly.

It must be said that the correlation of Bitcoin’s price trend with that of the stock markets is not very high, except at times. This decorrelation has been going on for a while now, although until mid-August the two trends were decidedly more similar.

In other words, in recent weeks Bitcoin seems to have held up better than the equity markets, which are probably more discounting fears about the economy’s resilience, or even China’s already ongoing economic problems.

Bitcoin’s strength: price correlation with the stock market

However, it is neither the case that the resilience Bitcoin has been demonstrating since 12 September is likely to last, nor that the decorrelation with stock markets cannot end.

On the contrary, given what happened yesterday it is possible to imagine that the correlation is increasing these last few days. Then again, throughout the first part of 2023 the correlation has been quite evident, albeit with some exceptions.

The fact is that equity markets right now are weak, while Bitcoin is showing some tentative signs of strength.

Probably the disconnect stems precisely from the fact that the crypto markets have already largely discounted the inevitable weakness resulting from the bursting of the speculative bubble, while perhaps this has not yet largely occurred in the equity markets.

Comparing current values with 2021 peaks, Bitcoin is at -60%, while S&P500 at -10% and Hang Seng at -40%.

In addition, many are waiting for the April 2024 halving that will start Bitcoin’s new cycle, and this prospect is getting stronger and stronger as it approaches.

None of this may affect equity markets, however, whose decline may not yet be fully over.