Growing Bitcoin US stocks correlation amid Evergrande selloff disputes BTC’s digital gold narrative

Key takeaways

  • BTC/USD pair closely tracked recent stock price movements, a correlation analysis says.
  • Bitcoin steers away from the digital gold narrative to become nothing more than a volatile investment.
  • BTC/USD pair in oversold territory, but rebound signals in tandem with stocks emerge.

JAIPUR (CoinChapter.com) – Bitcoin behaved more like a risk-on asset quite similar to stocks deviating from its digital gold narrative amid the recent Evergrande led global market sell-off. The correlation between the BTC/USD pair and US equities reached its highest level this year.

” First time in a while that moves in various asset classes correspond to historical correlations: The generalized selloff in #stocks and other risk assets is accompanied by significantly lower government bond yields/commodities, and a #VIX spike. Also notable: 9% fall in #Bitcoin.”

observed Mohamed A. El-Erian, President, Queens’ College, Cambridge University in a tweet on Monday

The BTC/USD pair largely remained uncorrelated with the S&P 500 since the beginning of the year. Their correlation picked up only after July 20, when Bitcoin’s market recovery began in earnest on the back of the B-Word Conference. One reason explaining the same attributes to the Fed’s intention to kickstart stimulus tightening this year.

Related: Bitcoin and S&P 500 correlation strengthens against taper tantrum fears

“There’s a bit of uncertainty in the markets with the upcoming Fed taper talks and meetings.”

Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore told Bloomberg
Bitcoin's correlation with stocks exponentially increased
Bitcoin’s correlation with stocks exponentially increased. Source: Bloomberg

Digital Gold Narrative Running Out Of Steam

Bitcoin’s growing correlation with US stocks has jeopardized the benchmark’s cryptocurrency “digital gold ” reputation.

“When selling fears grow and speculative risks are reduced, bitcoin/crypto demonstrate that it is not indeed some sort of low-risk store of value, nor is it gold.. ‘digital gold’. It is a store of speculation, a high risk volatile speculation built on a lot of bubble hopium.”

observed GoldSeek.com, and SilverSeek.com President Peter Spina

Related: Bitcoin plunges over 10% in global market rout led by China’s housing bubble crisis

But despite the volatility, analysts believe that the benchmark cryptocurrency’s price shows sporadic movement due to its relatively new origins. Rising Bitcoin adoption and significant liquidity infusion in BTC/USD markets, especially from the institutional crowd would diffuse the asset’s volatility over time.

For now, the flagship cryptocurrency is trending in oversold territory.

BTC/USD Technical Setup

Following the death cross setup occurrence on Monday, when the Evergrande led-global market selloff took shape, the BTC/USD pair dropped to lows near $40,164. The same triggered a colossal drop in relative strength index (RSI) numbers. The indicator clocked 21.14 during the opening bell of the London trading session on Tuesday.

BTC/USD entered oversold conditions
BTC/USD entered oversold conditions. Source: BTCUSD on TradingView.com

Bulls attempted a recovery but were overpowered by the bears. Selling pressure is strong, but the pair looks oversold, with opportunities ripe for buyers to place long bids and a potential rebound from current prices.


However, a rebounding move should ideally lead to a close above $44,329 and then subsequently above $48,651 for bullish sentiment to return. Thus, the short-term upside target remains near $52,852. Nonetheless, if the selloff continues, a drop to prices near $38,000 cannot be ruled out.

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