Why the worst might not be over for Bitcoin

After the Bitcoin collapsed by around 50% in a single day on March 12th, this massive crash shocked even long-term hodlers. It is all the more relieving that the Bitcoin share price was able to recover well in the last few weeks after its crashes in March.

Die-hard Bitcoin fans, in particular, are still hoping for a so-called “decoupling”, i.e. a decoupling between Bitcoin’s share price performance and traditional markets. However, by only taking a single look at the bare figures, this hope quickly vanishes. The Bitcoin price has been outperformed by the S&P 500 since the end of February. The correlation remains high and there are good reasons to assume that the worst is not yet over for all markets.

Discover the latest economic news from around the world with the best online news aggregator. Download our companion app, Born2Invest, available fro free in PlayStore, and stay on top of the crypto market.

Bitcoin price outperforms despite recovery

Many BTC supporters have observed with great satisfaction, in recent weeks, that the Bitcoin share price has recovered strongly after the crash of 50% on March 12th.

On that day, the Bitcoin price reached its previous local low of $3,800 and is now trading at $6,900 again. This makes Lauf Coin360 a healthy plus of almost 51.5% since March 12th.

However, despite these positive figures, the comparison with the traditional markets in the form of the S&P 500 from the USA is not so rosy. Eric Wall, CIO of Arcane Assets, correctly pointed this out in a post on Twitter.

According to him, the Bitcoin share price fell by 40% between February 25th and March 23rd, while the S&P 500 slumped by “only” 33% in the same period. In addition to this stronger loss at BTC, a better recovery of the S&P 500 will follow. According to Wall, the S&P 500 recovered by 26% in the period from March 23rd to April 9th, while the Bitcoin price recovered by only 24%.

Bitcoin is likely to face another drop in prices

In addition to this sobering comparison, the correlation between the Bitcoin price and the traditional markets in the form of the S&P 500 obviously remains high. That is clearly demonstrated by the figures mentioned above.

The recovery in the Bitcoin price in recent weeks could therefore be mainly due to the recovery in the traditional markets. The “decoupling” hoped for by many BTC fans has therefore not yet taken place by far.

In view of the economic thunderstorm that is brewing worldwide, the rally on the stock markets in recent weeks is quite astonishing. Not only the unemployment figures of almost 16 million people in 3 weeks in the USA show this. If one assumes that the economy is still facing difficult times and that the financial markets should largely be a reflection of the fundamental development of the economy, this casts doubt on the sustainability of the recent rally.

This suggests that the stock markets as a whole could continue to decline over the coming months. Given the high correlation to the Bitcoin price, this would mean that the worst is not over for BTC either. However, only the future will show who will be right.

__

(Featured image by geralt via Pixabay)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.