Is the S&P 500 correlation good for Bitcoin?
The idea of a correlation between bitcoin and the price of gold is popular among investors. Bitcoin has positioned itself as “digital gold,” apparently supported by a rally in bitcoin and precious metals in recent months. However, there is still no consensus on this point. Analyst Plan B shows how bitcoin continues to be highly correlated with the S&P 500, so it’s a bullish argument for him. At the same time, experts are unanimous in predicting that a weaker dollar could mean further appreciation for Bitcoin.
For some analysts, Bitcoin continues to be correlated with the S&P 500 index. This other narrative reached its peak during the collapse of the traditional market in March this year, when Bitcoin and the crypto market had their “Black Thursday”. At that time, Bitcoin lost nearly 50% of its value in less than 24 hours and crashed collectively with the traditional financial market.
Since then, the correlation between the
S&P 500 Index and Bitcoin appears to have been negative for investors. Via
Twitter, Plan B now claimed that the correlation was not only maintained, but
also represents a bullish scenario for Bitcoin.
The analyst shared the following graph that
shows the apparent correlation. In addition, Plan B stated that Bitcoin has
been correlated to the S&P 500 since the first quarter of 2018, when the
U.S.-China trade war began. Then, as can be seen below, while the correlation
increased in the first quarter of 2020 to reach a high now, after a sharp drop.
According to Plan B, the U.S. Federal
Reserve will again implement quantitative easing it had stopped. In other
words, the Federal Reserve will again start to stimulate the market by buying
shares to increase liquidity and encourage lending. Based on that, Plan B made
the following prediction:
#Bitcoin and S&P500 move together. Note
BTC and S&P joint dips:
– Q1 2019 (Corona dip)
– Q4 2018 (FED tapering, stopping QE)
– Q1 2018 (US-China trade war)
However, data from analyst firm Skew shows
that the correlation between Bitcoin and the S&P 500 has declined after
peaking in mid-July. Although the trend is upward, as shown in the chart below,
the correlation has been relatively stable in recent weeks, compared to Plan
As several analysts have noted, Bitcoin has
been one of the biggest beneficiaries of the Fed’s inflation policy. Although
the US dollar seems to be reaching a support level, it has fallen 3% after its
yearly high in February. Bitcoin trader and founder of Quantum Economics, Mati
Greenspan, predicts that this trend will continue:
(…) the Fed has been the most aggressive
central bank during this crisis by far and they’ve basically drown the market
in Dollar liquidity. So my guess is down. But we’re long overdue a Dollar
correction at this point. Markets rarely continue this long in a single
This is why institutional interest in
Bitcoin has increased. As reported by CNF, the Nasdaq giant MicroStrategy has
begun to accumulate Bitcoin as a major reserve asset to protect against dollar
inflation. Former Goldman Sachs employee Raoul Pal has established a position
similar to that of MicroStrategy. In the long term, Pal has predicted that Bitcoin
will outperform all other assets, stocks and precious metals.
Author : Reynaldo