Bitcoin’s Minute-By-Minute Correlation With Stock Market May Signal Disaster

Tony "The Bull" Severino

Last Updated: March 17, 2020 4:00 pm

3 mins read

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For most of Bitcoin’s life, it’s been a pitched as an asset uncorrelated from the stock market and other traditional equities. It’s been a strong selling point for institutional investors seeking to add variety or even derisk their portfolios.

However, as of late, the first-ever cryptocurrency has been exhibiting a minute-by-minute correlation with the stock market, and if it continues, it could spell doom for the young digital asset.

Bitcoin Begins to Show Minute-By-Minute Correlation With S&P 500

While Bitcoin was born during the last recession, it is about to face the first major recession since it was first introduced into the world, and no one yet knows how it will react.

The cryptocurrency was designed to have certain attributes that made the asset far more comparable to a scarce commodity like gold, rather than a currency that can be printed at whim or a stock share tied to the value of a corporation.

It’s helped to position the asset as a highly uncorrelated asset that investors should at least include a small portion of within their investment portfolio.

However, over the last couple of weeks, with the coronavirus outbreak causing a panic selloff of epic proportions, Bitcoin has suddenly shown a correlation with the stock market.

And more recently, the correlation has become so significant, Bitcoin and the S&P 500, one of the most important stock indexes to the US economy, are showing an uncanny, minute-by-minute similarity.

1 minute chart.

One of these lines is the S&P500, one of these lines is bitcoin. pic.twitter.com/N3vIS5Kl6X

— lowstrife (@lowstrife) March 16, 2020

The Dow May Be Signalling The Greatest Collapse The Economy Has Ever Seen

Bitcoin following the stock market is very dangerous, however. Bitcoin has only known bull market and has never faced a recession, despite being designed to withstand one.

The danger is due to the stock market showing signs of the greatest collapse the world has ever seen, in what could ultimately be a 100-year “top” to the most powerful bull market in history.

In the Dow Jones Industrial Average index chart below, over 100 years of an ongoing bull market can be seen potentially coming to an end.

The recent collapse in the stock market has the Dow resting on a trend line stemming back from 1982, just before TCP/IP became the standard for what eventually became the modern internet.

There’s also a corresponding bearish divergence dating back from the dot com bubble on the Relative Strength Index, and the MACD is signaling overbought conditions and a potential downturn.

The stock market is facing potential disaster, and if Bitcoin remains heavily correlated with traditional markets, it could continue to suffer in the face of a coming recession.

Featured image from Shutterstock

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