- Bitcoin’s price movement has been significantly positive and outperforming as compared to major altcoins
- In this year particularly, Bitcoin has been correlated with many other financial markets and assets
- The current price movement of BTC is soaking positive volume from the altcoins creating a bluff
From the inception of this year, the cryptomarket has been rumored about its correlation with the global market forces. The first quarter of the year started the study of price movements between the world’s largest crypto asset Bitcoin with the U.S stock index. As the pandemic hit globally creating mass panic, the financial markets on the global scale dropped down abruptly. In between, the second quarter of the year, BTC was getting compared to the price movements of gold ($) as both the financial instruments started to recover at a rapid pace. In the third quarter of the financial year, the price momentum of the overall crypto market somehow defied both U.S. stock indices and gold also. Some of the famous global financial personalities including Max Keiser, a bitcoin pioneer, and a wall street analyst who insists that Bitcoin has an inverse relationship with USD besides the stock markets.
By the end of October 2020, Bitcoin defied many assumptions of having a direct or inverse correlation with other global financial markets and independently made price movements. John Ehrlichman, a famous news anchor of Bloomberg and CTV national news, posted the performance of global investment avenues for the year in which Bitcoin has provided a return of 79.00% while Ethereum has performed 200.00% in terms of pricing. While centralized investments like JP Morgan, Bank of America, Citigroup, and Wells Fargo have performed negatively.
Let us have a brief look at the price movements of Bitcoin concerning other global markets:
Are The Speculations of Correlation of the U.S. Market and Bitcoin True?
The Dow Jones Industrial Average index is a price-weighted average consisting of 30 of the biggest American publicly-traded companies on the New York Stock Exchange and NASDAQ which includes companies such as Goldman Sachs, IBM, and Walt Disney. The index has been considered to be a barometer of the state of the American economy and is amongst the most well-known and used stock indexes in the world.
The price chart of the index highlights the global stock market crash of 2020 which is also referred to as the CORONAVIRUS CRASH which began on 20th February 2020 and ended on 7th April 2020. The crash is considered to be the fastest fall in the global stock markets in financial history and the most destructive crash. However, the crash was on a short-term basis and the bulls re-entered the market in April 2020. On the opening day of March 9th, 2020 which is considered as BLACK MONDAY, the DJIA futures market faced a 1300 point drop based on the pandemic and the Russia-Saudi Arabia oil price war. However, another significant crash day was still awaited. On March 12th, 2020, DJIA closed down on a loss of 10% eclipsing the one-day record that was set on March 9th, 2020. The bear sentiment in the U.S. market vanished in the next month itself with S&P 500 posted its third-largest monthly gain since World War II and the Dow had the best month in terms of performance in the last 33 years with a positive rally of 11.1%.
The price chart highlights the price movement of both Bitcoin and the S&P 500 over the current year. Both the financial instruments faced a heavy downfall in March because an occurrence of a pandemic is a globally affecting factor. The financial markets all over the world including the crypto market faced a situation of a complete downfall at regular intervals for the month. Bitcoin almost faced a price drop of -40.00% during the month while the S&P 500 price levels were down by 30.00%. The recovery for both the financial assets started in the next month itself. However, we can observe that Bitcoin was able to recover the levels in the market with more significance as compared to S&P 500. Looking at the ongoing positive trend for BTC, S&P 500 hasn’t shown any significant positive momentum at the same time. At the time of writing, DIJA again dropped by 900 points on 28th October 2020, while BTC sustained its bullish levels defying all the concepts of the correlation.
Therefore, the correlation between the U.S. Market and crypto markets can truly establish when there is a global/aggregate factor coming into play just like the COVID-19 pandemic. The U.S. financial market will change its behavior based on centralized news, fundamentals, and sentiments but the crypto market is a decentralized investment platform that will not show that much of a change of correlation. As time goes on, the impact of the news related to the pandemic on the crypto market is also started to decrease meaning that the overall market conditions of the crypto world are starting to withdraw its connectivity with the centralized market.
Is Bitcoin the Next Valuable Virtual Ornament with Gold?
The correlation between Bitcoin and Gold has been one of the close tie-ups in recent times. According to some famous analysts, the combination of Bitcoin and gold generally feeds on the downfall of the U.S dollar. The percentage of Bitcoin-Gold realized correlation provided by crypto analytics companies tells us that during the starting of the year, the correlation made a peak of 60% during the second quarter of 2020. The rising correlation supported the idea that Bitcoin is a store of value just like gold, particularly at a time of economic turmoil.
As we can notice from the above graph, both Bitcoin and Gold have given sharp rising rallies throughout 2020 which is driven by the efforts of centralized bodies including government and central banks of money printing keen to keep their economic conditions stable in the wake of the coronavirus pandemic. However, during the global crash in March 2020, Bitcoin fell more than 30.00% while Gold tanked 4.7% to $1932, a decline in a pairing which would indicate the correlation.
Another reason for the correlation getting strong is that damage was done by COVID-19 to world economies and forcing the governments of several countries to dole trillions of dollars in economic stimulus making their domestic currency weak including the U.S. Dollar. Therefore, a rational choice for investors in such a scenario can be investments in a safe-haven asset like Gold.
In an earlier report by renowned news agency Bloomberg, they forecast that Bitcoin will be the next mature and safe-haven asset in terms of investment. The report also said that the correlation between the two financial assets has been jumping to all-time highs. It also further discussed how BTC can be treated as a digital gold which appeals to be a cashless internet economy.
Overall, the correlation between the two assets is currently still on the rise as the global sentiments become weak due to continuous rising COVID-19 cases around the globe making commodities like Gold and digital financial assets like Bitcoin more valuable in terms of a store of value. It will be interesting to watch the correlation levels when the vaccine for this pandemic rolls out globally.
Do BTC Really Feeds On A Weaker Dollar?
Due to the heavy build-up of debate that BTC is having a high degree of correlation with the equity market and movement of BTC and Gold in similar tandem, it was also found that the weakness in the U.S. dollar drove up the price levels of Bitcoin in a positive manner. If we dive deep into the details, a world reserve currency in the economic market usually becomes weak due to negative sentiments prevailing such as the ongoing pandemic which means that BTC price levels should boost up in such a scenario. However, the pandemic is a negative sentiment that hurts the global financial markets including the crypto market. But the effects of the negative aspects last long on a currency as compared to a digital asset. Government printing and pouring more currency through their respective central regulatory banks bring more negative impact to the currency resulting in an increase of valuation in the digital assets. Let us look at the charts for further understanding of the inverse relationship between Bitcoin and the U.S. Dollar.
The price chart of Bitcoin and U.S. Dollar reflects on the sudden impact of the global pandemic which led to a heavy increase in the demand for U.S Dollars and we can see a huge spike in the levels by an orange line. At the same time, Bitcoin price levels dropped abruptly due to weak global sentiments. However, with the massive crash in the U.S. stock market and the weakening of global indices day by day, Dollar price levels started to fall with more printing and flow in the market by the government. Now, it was the time for Bitcoin to become a “digital safe-haven asset” and the price levels started to surge amid weak global sentiments.
From the past few months, we can see that Bitcoin bulls are feeding on the lower level of the U.S. Dollar creating a perfect competition scenario between a centralized financial asset and a decentralized financial asset. Overall, we can say that both the financial avenues are currently having a rigid competition between themselves with the U.S. Dollar having more factors to act upon, and Bitcoin turned out to be a digital store of value assets for the investors.
Is Bitcoin Outperforming Against Altcoins and Other Global Markets?
On the overall comparison between Bitcoin, S&P500, Gold, and U.S. Dollar, we can conclude that Bitcoin is strictly following the inverse relationship with the U.S. Dollar. The relationship between the U.S equity market and Bitcoin was somehow direct as the price movement behavior between both of them was similar during the first quarter of the year in which the pandemic was an aggregate factor. But with time, Bitcoin was able to gain bullish momentum amid rising cases of COVID-19 around the globe, and the equity market of several countries still facing negative momentum as soon as the economic conditions get hit by another negative fundamental caused by the pandemic. Gold being a physical safe-haven investment and creating more store value due to the global widespread of the disease, showed similar growth prospects with that of BTC. However, the direct price movement relationship between BTC and GOLD will surely be tested once the vaccine for COVID-19 rolls out globally.
The metrics provided by Glassnode highlights Bitcoin soaking all the positive volume from other altcoins in the crypto market in the past week. Ethereum, being the world’s second-largest crypto asset only showed a positive momentum till the price level of $420.00 whereas Bitcoin reached new levels for the year by breaking above $13k and almost tested $14k in another bull run. Other major altcoins like Ripple, Bitcoin Cash, Binance Coin didn’t move positively with that much significance in the market. This indicates that BTC is soaking the overall positive volume in the market and emerging as a digital store of value assets for the investors.
This metric by Glassnode highlights the performance of altcoins against Bitcoin from the past week which also justifies BTC becoming the sole major performing crypto asset in the entire market. None of the major altcoins like Chainlink, Ethereum, Bitcoin Cash, Ripple, Binance Coin, etc. were able to perform positively against BTC. This indicates that BTC might provide significant price damages to the whole altcoin sector in the upcoming trading session while its price levels can have a boost.
Another reason for BTC being the sole positive performer in the market is the continuous rise in overall BTC dominance levels. At the start of September, the dominance level stood at 57.00% and took a bullish move which is still prevailing and looking to gain more further ahead in the market. The current level stands at 63.12% indicating that Bitcoin is surely increasing its significance in the market while disrupting and soaking the positive volume from the other major altcoins.
Looking onto the forecast for Bitcoin price levels, the bulls can sustain a $13k level amid negative momentum in the overall market conditions for the day. BTC bulls also tested the resistance level of $13800 and kept targeting upper circuits at regular intervals. We can expect Bitcoin to break the resistance level of $13800 and test the crucial mark of $14K in the upcoming month as it is Bullish November for the cryptomarket!
