Why is the Bitcoin Price Correlation with the Stock Market Currently High?

摘要： It is important to understand Bitcoin's correlations with the US dollar and traditional assets, then find a rule in the relationship, so we can predict the Bitcoin market by observing the performance of other markets, like stocks and gold.

Recent Stock and Crypto Market Bull Run Driven by Unlimited QE

There is no doubt that Bitcoin (BTC) and the overall crypto market has some correlation with the stock market, with market experts remarking that Bitcoin has been surging in tandem with traditional markets for awhile. Extensive research has already been conducted by market experts to study the seeming correlation of both markets.

In the article, we use a simple holistic method to observe the Bitcoin and crypto market correlation with the stock market movements of this year.

Nasdaq fell to 6,686.36 - its one-year low on March 18; The Dow Jones Industrial Average fell to 19,094.27, its one-year low on March 20; S&P 500 fell to 2,191.86, its one-year low at March 23. During this period of the COVID-19 market crash, Bitcoin also crashed to $3,800m its lowest point for the year on March 13 with Ethereum falling to its own yearly low of $86 on the same day.

On March 23, the day S&P 500 plunged to its low, was the day the most influential thing which occurred for the market. The Federal Reserve announced unlimited QE and set up several new lending programs, which meant enough money would be provided to sustain the market without boundaries or limits. The new money supply and its expectations have become the most important factor for both the stock and crypto markets which tend to rise when liquidity is made freely available.

Since then, both the stock market and the crypto market started a bull run. On Sept 2, the S&P 500 and Nasdaq reached a record high and on Sept 3, the Dow reached a record high. Ethereum reached a 2-year high on Sept 1. Bitcoin however was a bit different which reached a 1-year high on Aug 17, but this was influenced heavily by the announcement of MicroStrategy choosing Bitcoin as its primary reserve currency and investing $250 Million into the cryptocurrency.

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