Bitcoin Resembles Gold Not Stock Market & Gold has Already Bottomed: Weiss Ratings
What’s exactly the correlation between Bitcoin and the stock market and gold? Martin D. Weiss of Weiss Ratings talks about just that in his latest blog. Weiss discusses the scenario of a decline in the stock market to be expected to begin in April and its effect on the crypto market.
Cryptos Are A Risk-On Asset
Taking a look at the historical market patterns, it can be easily pointed out that the price movement in Bitcoin is highly correlated to those of altcoins.
For the past nine years, since Bitcoin first came into existence, S&P 500 had been in a bull market. So, there's nothing to compare here which brings forth the facts that there is no correlation,
“Whether looking at the daily, weekly or monthly fluctuations, there’s virtually zero statistical correlation between stocks and crypto.”
Moving on to the part that is most concerning is the “risk-on” category involving stocks and speculative real estate that Bitcoin and cryptocurrencies are put into. This raises a crucial question which is when stock portfolios sink in a bear market, will these investors sell cryptocurrencies as well that they associate with risk.
As stocks fall, will this put pressure on crypto prices as well? Weiss questions that with “investors waking up one morning and saying:
“Oops! Big losses in my stocks! I’ll sell my crypto to raise the cash.”
Bitcoin Resembles Gold & It Has Already Bottomed
Bitcoin might not have a correlation with the stock market but it does have with another commodity. If we are looking for similarities, it’s with gold. Bitcoin could be very well the “digital gold” and “gold 2.0,” as its primary use case is becoming that of a store of value. Better yet, “It cannot be confiscated by any government.”
Talking about the important resemblance to gold, he notes,
“At major market highs, both Bitcoin and gold make sharp U-turns. We call them “pinpoint tops.” and at major market lows, both Bitcoin and gold form long bottoming patterns. We call them “rounded bottoms.”
Last year, in August, “gold hit bottom” and is now in a new 3-year cycle with its upswing in early stages. Gold is expected to surge through $1,400-per-ounce zone with a good chance of hitting its all-time high around $2000 level.
“Bitcoin is not far behind. The charts tell us it’s currently still in a bear market, but improving fundamentals tell us a new bull market is in the making.”
Weiss points out that advanced cryptos like TRON and EOS have already “enjoyed a surge in usage”. Moreover, altcoins with a big market cap like Ethereum and XRP have “shown signs of escaping the bear.” Not to forget the most important fact that,
“Distributed Ledger Technology continues to advance by leaps and bounds.”
Weiss concludes by stating that investors should not detract by the bear market in stocks. But advises until Bitcoin signals that its bear market is over, “prudence dictates caution”