Bitcoin’s correlation with the traditional financial market is at a 2-year high and this is a bearish signal for the crypto market.
Santiment, a crypto market research firm noted that the recent market downward movement resulted in a high correlation with the S&P 500. The firm therefore released a detailed research article about what can be learnt with regards to this unprecedented downturn among both markets.
Santiment revealed that Bitcoin’s correlation with the S&P 500 cyclically moves from negative to positive values and the firm attributed this growth in correlation to the coronavirus pandemic.
The firm stated that, the coronavirus pandemic has resulted in a very similar movement in tandem, as the coronavirus has put investors in almost every sector, in a similar state of cautiousness.
Santiment explained in the tweet that historic Bitcoin data shows that a high correlation with the S&P 500 is typically accompanied by major downturns in the crypto markets. It further noted that any subsequent bounce-backs over time are typically foreshadowed by a growing ‘decoupling’ between the Bitcoin market and the S&P 500. Santiment claims we should see an obvious sign of an impending uptrend when the correlation begins to approach zero or lower again.
When Bitcoin witnessed its downturn earlier this month, most bitcoin holders lost confidence in it. Notable among them is Galaxy Digital CEO, Mike Novogratz. According to Novogratz, Bitcoin was always a confidence game but now it appears global confidence in just about anything has vanished.
However, there are still some prominent Bitcoin maximalists who regained confidence in it after the coin has made a recent rebound. Raoul Pal, founder and CEO of Global Macro Investor, recently stated that he is quite bullish on Bitcoin after it had recovered by almost 80% in one week.