Crypto, stocks, bonds. Just about everything has had a tough time lately. But perhaps Bitcoin’s poor performance can be blamed on the stock market.
Bitcoin, which trades 24/7, largely tends to rise on weekends, and the coin saw no abnormal movement between 9:30 a.m. and 4 p.m. on Saturdays and Sundays, which are the US stock market hours during the week. But from Monday to Friday, its intraday trajectory is very different, according to Bespoke Investment Group. Bitcoin was slightly lower at 9:40 a.m. in New York at around $29,180 on Tuesday.
Ahead of the weekday stock open, the biggest cryptocurrency tends to trade relatively flat. But once the market opens, Bitcoin falls “off a cliff,” with an average decline of around 1.5% during market hours. When trading in US stocks ends, the token reverts to sideways trading for a few hours and then tends to rally from 8 p.m. to midnight, Bespoke found.
“Basically, all of Bitcoin’s decline over the past month has occurred when US markets were open,” Bespoke strategists wrote in a note. “This signals to us that recent Bitcoin declines have been more about investors raising funds and selling assets more broadly rather than a more Bitcoin-specific trend.”
Analysts have noted all year that cryptocurrencies and stocks have been joined at the hip in their movements. When one rises on a given day, the other tends to follow, and vice versa. Correlations between stocks and Bitcoin have been strong, and the relationship is even more pronounced between coin and tech stocks, which can sometimes be seen as more speculative plays in the market.
The 90-day correlation coefficient for Bitcoin and the Tech Gauge now sits above 0.68, among the highest such readings in Bloomberg data dating back to 2010. A coefficient of 1 means that the assets are moving at the same rate, while minus-1 would show that they’re moving in opposite directions.
All sorts of riskier assets have struggled this year as the Federal Reserve slowly unwinds the accommodative policies it had put in place to help the US economy through the pandemic. The central bank is raising interest rates in an attempt to calm inflation, which has hurt riskier or more speculative businesses and assets.
“In addition to bitcoin’s steadier price action over the weekend and outside of regular trading hours, risk sentiment in equity markets during regular US trading hours appears to play a significant role in the reason why Bitcoin saw such steep declines almost solely during US time,” Bespoke said in the note. “Essentially, as the stock market drives the taxi, Bitcoin has been the unwitting passenger in the back.”
This article was provided by Bloomberg News.