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

Bitcoin and S&P 500 correlation strengthens against taper tantrum fears
“Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo” by antanacoins is licensed under CC BY-SA 2.0
  • Bitcoin’s correlation with the S&P 500 picked up
  • Inverse correlation between Gold and the top cryptocurrency lessened
  • Fed to begin tapering this year

JAIPUR (Coinchapter.com) – The correlation between Bitcoin and the S&P 500 ticked up as Fed officials hinted at the start of stimulus tightening from this year.

The top cryptocurrency tracked the benchmark stock index even in recent loss-filled sessions, data from Santiment showed. Bitcoin largely remained uncorrelated with the S&P 500 since the beginning of the year.

Bitcoin's correlation with gold and the S&P 500 grew strong recently
Bitcoin’s correlation with gold and the S&P 500 grew strong recently. Source: Santiment

Their correlation picked up only after July 20, when Bitcoin’s market recovery began in earnest on the back of the B-Word Conference.

Related: Coinbase whales behind the latest Bitcoin bull run towards $47K, data suggests

Gold copied the moves of the top 500 US stocks from March to Mid-May, post which their correlation fell out. Between Bitcoin and XAU/USD, an inverse correlation pattern held strong. The yellow metal only recently resumed its upward trend following Bitcoin and the S&P 500’s upward trajectory.

Investors in all three asset classes opened long positions unfazed by the possibility of tapering beginning later this year.

To Taper Or Not To Taper This Year

Most Federal Open Market Committee (FOMC) members seemed convinced by the rebound in US economic and labor market growth in the July meeting. As a result, they unanimously opined to plug the purchase of $120 billion worth of monthly asset purchases later this year.

“Most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,”

said the minutes
Federal Reserve could start tapering this year
Federal Reserve could start tapering this year.

However, the committee as a whole remains divided. Fed officials achieved consensus on restricting the average pace of inflation to around 2 percent. But found themselves indecisive on achieving employment targets in the country, especially with the delta variant playing spoilsport with labor market growth.

While some members called for the tapering to begin in the next few months, others suggested postponement due to a bleak economic outlook.

“there’s a range of views on what timing will be appropriate”.

Fed chair Jay Powell said last month

Bitcoin Slipped But Uptrend Strong

On Friday, the flagship cryptocurrency took a breather after topping at $48,000 as the BTC/USD exchange rate sauntered into overbought territory. However, bears were caught off-guard as long-term investors dismissed the Fed’s tantrums and bought all market dips since Wednesday.

Bulls bought the possible occurrence of the Golden Cross formation next month and the ballooning balance sheets of the Fed, the Bank of Japan, and the European Central Bank.

Related: Bitcoin (BTC) could top $100,000 early next year, supported by bullish indicators

Bitcoin could dip to $44,000
Bitcoin could dip to $44,000. Source: BTCUSD on TradingView.com

Currently, BTC/USD is testing the bottom trendline of the Ascending Channel, within which the pair has been trading since July 20. Bulls and bears are locked in loggerheads. If the latter takes over, Bitcoin could experience a drop to $44,000 and then to $40,000 (worst possible scenario).


A potential bullish reversal, however, puts the next upward price target for Bitcoin near $60,000.

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