Bloomberg News reports that stocks, crypto, and bonds, almost everything, have been facing a tough time recently. However, maybe the underperformance of bitcoin can be held responsible for the poor performance of the equities market.
Bitcoin trades round the clock have shown a tendency to move higher on weekends. There have been no abnormal postings of the largest cryptocurrency between 9.30 am and 4 pm on Saturday and Sunday, which are considered the operating hours of the US during the week. But the intraday path appears to be different, as per Bespoke Investment Group. Bitcoin was lower at 9:40 am in New York at about $29,180.
Before opening the stocks on weekdays, Bitcoin, the largest digital token, tends to trade fat relatively. But with the market’s opening, Bitcoin tumbles off steeply and manifests an average drop of approximately 1.5% during the market hours. When trading of US stocks ends, there is sideways trading manifested by the token for a couple of hours, and then rallies from 8 pm until midnight, as found by Bespoke.
As per the strategist of Bespoke, the decline of Bitcoin over the past month had occurred when markets in the US were open, as written in a note by the strategist. This indicates that the recent drop for Bitcoin has been due to raising cash by the investors and selling assets broadly instead of a Bitcoin-specific trend.
Bloomberg News reports that analysts have noticed that those stocks and cryptocurrency have been joined at the hip if their moves are concerned. If one surges, the other one follows suit and vice versa. The correlation between Bitcoin and stocks is strong. More pronounced is the relationship between tech stocks and coins, which can sometimes be considered a more speculative player in the market.
In the current year, all the riskier assets have been in distress since the accommodative policies it had put in place to support the US economy throughout the pandemic are slowly being removed by the Federal Reserve. There have been rising interest rates intending to cool inflation, which has hurt the assets and the companies related to the riskier ones or ones in the speculative spectrum.
According to Bespoke, as mentioned in a note, atop the more stable Bitcoin’s price action on the weekends and beyond the normal market working hours, the prevailing risk-off sentiment that is present during the US trading hours happens to be playing a crucial role in why the largest cryptocurrency has seen significant declines only during the US hours. It also mentioned that as Bitcoin has been a passenger that is unwitting taking the passenger’s seat, the stock market has essentially been in the driver’s seat.
