Originally published in a Bitcoin BullBear Market Update on 10/15/2014. Partial excerpt only. Written by @AKWAnalytics.
It is very rare when the volatility of the stock market overshadows the volatility in the bitcoin market, but indeed that was the case this week. The next few months should be very interesting as this will be the first period of true stock market uncertainty since bitcoin has gained legitimacy.
There are many analysts in the crypto space that seem to think that bitcoin is somehow fundamentally correlated to the S&P 500. Perhaps this is due to a risk-on point of view, or perhaps it is due to a misunderstanding of bitcoin itself, but either way we think they are way off-base. FIrst, bitcoin has literally only existed during an equity bull market! Born in 2009 at the height of the (first) financial crisis, bitcoin didn’t even gain a monetary value until the S&P 500 bull market was well underway in early 2010.
Also, it makes no sense to us that this would be the case as for the past few months bitcoin has been trading alongside the broader commodity market which has been going down. This is a harbinger of delfation in our opinion, which is the correct response by the market given a finite, distributed asset.
And lastly, we think extrapolating a correlation between equities and bitcoin is a stretch at best due to simple market mechanics. Stocks are still near ATH’s and are just now coming down from those lofty heights, while bitcoin is gaining momentum near its yearly lows. As a contrarian and a trader, it sounds to me like an INVERSE correlation may be the right on in retrospect.
Cheers,
@AKWAnalytics
BTC/USD daily chart
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