Analysts warned that if stocks fall, Bitcoin may fall by the price level of $30,000


The specter of the stock market crash haunts Bitcoin again (Bitcoin).

The last time occurred in March 2020. At the time, the prospect of a rapidly spreading coronavirus pandemic led to the blockade of developed and emerging economies. In turn, the global stock market crashed in series, and Bitcoin depreciated by half in just two days.

At the same time, the U.S. dollar index (DXY), which represents the strength of the U.S. dollar against a basket of major foreign currencies, is now Climbed It rose 8.78% to 102.992, the highest level since January 2017.

The large negative correlation shows that investors dumped their stocks and Bitcoin assets and sought safety in what they thought was a better safe haven: the dollar.

More than a year later, Bitcoin and the stock market once again struggled with similar bearish sentiment, this time as a result of new demand for the U.S. dollar following the Fed’s tough tone.

In other words, the U.S. Central Bank Announced on Wednesday It will start raising its benchmark interest rate before the end of 2023, one year ahead of schedule.

Lower interest rates help pull Bitcoin and the US stock market out of their bearish sleep. As the Fed pushed up lending rates to the range of 0%-0.25%, the benchmark cryptocurrency jumped from USD 3,858 in March 2020 to nearly USD 65,000 in April 2021.

At the same time, the S&P 500 index rose by more than 95% from its peak in mid-March 2020 to 4,257.16. As shown in the chart below, the Dow Jones and Nasdaq also rose.

Bitcoin, Nasdaq Composite Index, S&P 500 Index and Dow Jones Index rose simultaneously after the crash in March 2020. Source: TradingView.com

This is what happened after the Fed announced a rate hike on Wednesday…

After the Fed’s interest rate hike update, Bitcoin and the U.S. stock market plummeted. Source: TradingView.com

At the same time, the U.S. dollar index jumped to a two-month high, suggesting a renewed interest in the U.S. dollar in the global market.

After the announcement of the interest rate hike, the US dollar index rose to 2.06%. Source: TradingView.com

Popular on-chain analyst Willy Woo Say Friday’s stock market crash coupled with a rise in the U.S. dollar may increase Bitcoin’s bearish outlook.

He explained: “If the stonks fall, then DXY (the dollar is strong) will rebound a lot, which is a typical feature of funds turning to safety.”

Michael Burry, the head of Scion Asset Management, also Alarm bells sounded In the upcoming Bitcoin and stock market crashes, adding that when the crypto market drops from trillions of dollars, or when meme stock drops from billions of dollars, the losses on the street will be close to the size of the country.

“As with most things, the problem with cryptocurrencies is leverage,” he said Tweet“If you don’t know how much leverage encryption has, then you don’t know anything about encryption.”

Barry later deleted his tweet.

Some bullish hope

Away from price movements, Bitcoin’s adoption rate continues to grow, which was the missing upward catalyst during the March 2020 crash.

Friday, CNBC Report Goldman Sachs has started trading Bitcoin futures with Galaxy Digital, an encrypted commercial bank led by former hedge fund tycoon Mike Novogratz. The financial news service claimed that Goldman Sachs’ call to hire Galaxy as its liquidity provider was in response to the increasing pressure of its wealthy customers.

related: Hawkish Fed comments push down Bitcoin prices and stocks again

Damien Vanderwilt, co-president of Galaxy Digital, added that mainstream adoption will help Bitcoin reduce its notorious price volatility and pave the way for institutional participants to join the crypto trend. From his interview with CNBC:

“Once one bank is there, other banks will have [fear of missing out] They will join because their customers have been asking for it. “

Earlier, other major financial and banking services included Morgan Stanley, PayPal and Bank of New York Mellon, And also launched encryption-enabled services for its customers.

Is Bitcoin in a bear market?

Mention the question “Are we in a bear market?” Woo stated that despite the recent price drop, Bitcoin adoption still looks healthy. The analyst quoted on-chain indicators to show that user growth and capital injections in the Bitcoin market continue to increase.

He also pointed out that the recent Bitcoin sell-off only shifted BTC from weak to strong.

The 7-day moving average of coins moving between strong and weak hands. Source: Willy Woo

Wu reminded:

“My only concern about downside risks is that if there is a major correction in the stock market, no matter how the fundamentals on the chain suggest, it will pull down the BTC price. Note that the U.S. dollar index is strong, which indicates that some investors are turning to the U.S. dollar for safe-haven.”