Bitcoin’s Christmas Surge Could Signal a Strong Detachment from the Stock Market Dependency
Ever since they came to be, cryptocurrencies were believed to be dependant on the stock market, and that their performance can be directly influenced by it. However, as the holiday season approaches, the changes in the crypto market are different than analysts were expecting. To many, this might be an indication that Bitcoin and its altcoins might be independent.
The Stock Market Crash
For the most part of 2018, cryptocurrencies were constantly losing their value, while the stock market performed exceptionally well. The stocks already had a very successful 2017, and many believed that 2018 will continue the trend. This was true until Q3 of 2018 arrived.
In October of this year, things started to take a turn for the worst, and most of 2018 gains made by Nasdaq Composite Index, Dow Jones Industrial Average, and S&P 500 were wiped out. The losses experienced by Dow Jones Industrial Average were at around 16.3%, which are its largest since the Great Depression in 1931. As for Nasdaq Composite Index, it is set to close in a bear market.
Evidently, the stock market was not prepared to handle the massive amount of investor concerns. Things such as the possible US government shut down, the growth of the Federal Reserve's interest rates, issues regarding the US' trade war with China, and similar issues took the stock market by surprise. Before anyone could make sense of the situation, stocks prices were on a decline.
Crypto Market's Christmas Rally
While everyone expected that the crypto market will follow and drop even further down, especially after an extremely bearish year with two market crashes, the opposite happened. As of December 17th, Bitcoin and its altcoins experienced a price surge which has started returning massive amounts of gains to the market.
BTC has gone up by around 30% within a single week, and the crypto market got larger by around $40 billion, which allowed it to even outperform BTC itself. In comparison, S&P 500 lost 6.7% during the same time period.
The crypto surge also came after the market experienced significant losses in the previous 40 days. The crypto space lost around half of its value and the same is true for Bitcoin.
How Will This Affect He Future?
Apart from bringing faith in crypto back to investors around the world, the crypto surge might have other consequences as well. As mentioned, one of the oldest questions was whether or not the crypto market depends directly on the US stock market. While it was believed that this might be the case, many are now doubting such conclusions.
Some even stated that Bitcoin might become a safe haven in periods when the stock market crashes. However, most of the largest media news outlets have already dismissed this possibility. Ryan Rabaglia, the head of trading at Hong Kong-based crypto-dealing firm OSL, stated that the days of crypto being detached from the world seem to be running out.
A cryptocurrency portfolio manager, Travis Kling, also stated that this is the first time that traditional assets are experiencing a crisis during the existence of crypto. It was not possible to accurately predict what might happen prior to this event. Now, however, it appears clear that crypto doesn't depend on the US stock market.
Crypto has never existed during a bear market in traditional assets.
BTC was birthed at the very beginning of the largest monetary experiment ever- globally coordinated QE. Ending QE is causing pain
There is a significant chance Crypto is the best performing asset class in 2019 pic.twitter.com/vIdKTrm5sV
— Travis Kling (@Travis_Kling) December 23, 2018
Whether or not Bitcoin becomes a safe haven asset, the fact that cryptocurrencies are independent could make them useful for hosting different trading strategies. Fund managers might get encouraged to include BTC in diversified portfolios, while speculators might have a backup option for when the stock market crashes.
In the meanwhile, Bitcoin continues to grow, with its current price being at $4,175, with an increase of 2.83% in the last 24 hours.