It would appear that the stock market and Bitcoin (BTC) are moving in tandem once again.
On Friday, April 22, Bitcoin plunged more than 6% to $39.700- the midpoint of a three-month long trading range, as the US stock indexes also fell.
The S&P 500 lost 122 points, or 2.77%, to end the session at 4,271 points, while the Nasdaq Composite lost 335 points, or 2.55%, to 12,839. The Dow Jones plunged 981 points, or 2.82%, to 33,811.
The correlation between the flagship cryptocurrency and the S&P 500, Dow Jones, and Nasdaq 100 has been on the rise in recent months. And based on recent Dow Jones market data this trend is continuing.
The two-month rolling correlation coefficient between BTC and the S&P 500 index rose to 0.53 on Friday. This is the highest level since Jan. 24- suggesting the two assets are moving more in sync than typically expected. A coefficient close to 1 would indicate a strong relationship between the assets.
Additionally, this trend is likely to continue as investors seek to diversify their portfolios and protect themselves from downside risk. Bitcoin is seen as a hedge against inflation and a potential safe haven in times of economic uncertainty.
“We generally have market headwinds across pretty much all macro. Stocks, gold, oil, crypto, all had a pretty rough week,” Chris Kline, chief operating officer and co-founder of Bitcoin IRA told MW in an interview. “There’s a general understanding that the free money party may be coming to an end,” Kline said.
The world’s largest cryptocurrency by market cap, has been trading in the range of $38,000 to $48,000 for the past month. “I would anticipate that we’re still gonna be in this range bound,” Kline said. “It’s happening across multiple markets.”
Bitcoin hit an all-time high of nearly $69K last November, and has since been in a downtrend. The apex cryptocurrency has support at $37,500 with the 100-week moving average, currently at $35,700. A break below $35,000 could see the cryptocurrency test the $30,000 level.
The cryptocurrency market is still in its early developmental stages and is highly volatile. Bitcoin’s correlation with stocks may be a sign that the two markets are starting to become more intertwined. As institutional investors enter the cryptocurrency market, this volatility is likely to continue.