Bitcoin and Stock Markets Shows Signs of Re-coupling, Projects a Drop to $6k Range

Bitcoin price seems to be reacting negatively to the increased uncertainty in the equity markets. The apprehensions around the second wave of COVID-19 and rising debt crisis is acting as resistance to the rise in the S&P 500 index. On the other hand, while gold has been holding on to its’ gains during these times, Bitcoin is starting to show weakness as well.

Charles Edwards, financial analyst and founder of Capriole Investments tweeted,

Bitcoin & stock correlation in 2020. We have (sadly) “re-coupled” as of 10 June. Correlations at all time highs.

Notice the trend? High levels of fear and uncertainty (eg. VIX) = high levels of correlation.

The implied volatility index of the stock markets is still ranging high above $30, the range of which in the last two years was somewhere between $15-$20. The coupling of a drop in price in sync with rising VIX index reflects on the uncertainty in the price of Bitcoin; hence, its risk factor.

bitcoin correlation analysis — Bitcoin Correlation Analysis (Source: Tweet)

Correlation So Far

The correlation rose to a high above 0.6 units after the COVID-19 crash as a recovery in stocks and Bitcoin ensued. It dropped to lows near 0.4-0.41 during the halving pump and pullback. However, has crept up to 0.45 again. Crypto Trader and analyst, Don Alt, tweeted,

Bitcoin has been following the SPX pretty closely lately, just weaker. I hope that relationship ends soon, one of the main reasons why crypto as a whole is so attractive is that it’s not correlated.

The 200-Day Moving Average for SPX 500 is at $2693, the equivalent on Bitcoin is at $6073. Moreover, in the view of the last drop, SPX range between $2,600 – $2,800 corresponds to a price range of $6,500-$7500 on Bitcoin.

bitcoin 90-day volatility — Bitcoin [BTC] 90-Day Volatility (Source)

Nevertheless, Bitcoin’s 60-Day volatility index (actual) is currently at 5.4% which comes in the lower ranges compared to the last two years. In the past, consolidation with low volatility has led to bull runs in the crypto markets.

Do you think that Bitcoin will hold true to its’ correlation with SPX in the near future? Please share your views with us.

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