Bitcoin Price Correlates With Traditional Assets, but Not Entirely

Since coming to power back in 2016, President Trump seemed to have reinvigorated the United States stock market after it showed signs of slowing down throughout the first half of the previous decade. Just three weeks ago, the American market witnessed a combined gain of 58% compared with the last three or so years. However, following the World Health Organization’s recent declaration of the novel coronavirus pandemic on March 11 — with the independent research body citing 118,000 cases and more than 4,000 deaths globally — this rosy picture seems to have reversed almost overnight.

Additionally, ever since news of the medical emergency went live, markets all over the world began to crash at an unprecedented rate, with powerhouse economies such as Australia and India already gearing up for a period of heavy recession.

Not only that, regular office work all over the world has also been disrupted quite heavily — with many companies choosing to adopt work-from-home policies, seriously affecting global supply chains and causing many high-profile public events and major conferences to be cancelled.

Bitcoin Price Correlates With Traditional Assets, but Not Entirely

The virus effect

In the midst of all this, Bitcoin (BTC) has been on the receiving end of a lot of bearish pressure, with the premier crypto asset falling from $10,000 on Feb. 24, down to $4,800 by March 12. More specifically, Bitcoin’s value slid by more than $3,000 after New York State Governor Andrew Cuomo released a public statement issuing a medical emergency, thus sealing off a one-mile containment area around the NYC suburb of New Rochelle.

Despite the apparent link between BTC’s price drop and the ongoing market slump, some experts believe that the flagship cryptocurrency’s slide has more to do with the recent PlusToken dump and other internal factors rather than the prevailing coronavirus-induced market scare.

Regarding the matter, Bill Herrmann, CEO of alternative investment banking firm Wilshire Phoenix, is of the opinion that Bitcoin’s current negative movement can largely be attributed to the instability of the traditional market. On the subject, he opined: “In times of extreme volatility, which is often followed by panic — most retail investors, whether it’s Bitcoin or in equities, sell first and ask questions later.”

A similar opinion is also shared by Mati Greenspan, founder of Quantum Economics, who told Cointelegraph that it is quite extraordinary that during this period of extreme volatility, “Bitcoin seems to be mirroring stock indices quite concisely.”

However, David Waslen, CEO of HedgeTrade — a blockchain-powered financial trading application — told Cointelegraph that while there is definitely a correlation between Bitcoin’s performance and the traditional market at large, the comparisons are quite limited in nature since a number of niche variables make BTC totally different. Waslen added:

“Bitcoin’s price did react correspondingly to the stock market plunge recently, and continues to correlate to world news announcements. But it also does its own thing, for instance pumping on March 6th while stocks were in a tailspin. It’s also affected by things that have absolutely nothing to do with traditional markets, such as mining, whales, and exchange hacks.” Read More...