On September 27, 2022, the major stock market indexes collapsed, taking Bitcoin down with them.
Erasing gains accumulated earlier in the day on a slight weakening in the dollar, Bitcoin surged to $20,338.88 early before plunging to $18,902.66 by the end of the trading day. Ethereum also dropped to $1,238.84 from a 24-hour high of $1,397.29. At 1:45 p.m. New York time, most digital assets were down.
The S&P 500 marked new record lows for 2022, falling 0.5% from the last intraday record of 3,636 in June 2022. The Dow Jones Industrial Average fell 200 points after gaining 400 points at the start of the trading day.
“The fact that we’ve lost support at both 3900 and 3800 and are certainly moving towards the June lows tells you that the risk-off environment hasn’t changed much over the past six weeks,” he said Art Hogan by B Riley Financial.
The recent stock market moves round off a five-day dry spell for shares. The Dow Jones Industrial Average lost over 300 points on September 26, 2022, down 20% from its all-time high.
BTC rallied before heading higher with large stocks
Before its last dip in late trading on September 27, 2022, Bitcoin surged to levels not seen since mid-September. 2022. “Bitcoin stages a notable recovery amid mild respite elsewhere on Tuesday that will no doubt excite a crypto crowd after another difficult period. Turmoil elsewhere appears to have buoyed bitcoin, which largely trades as a high-risk asset,” said Craig Erlam of broker Oanda.
UTXO Management crypto analyst Dylan LeClair commented that this sign suggests Bitcoin has bottomed, using the cost basis of long- and short-term holders as a benchmark. The cost basis is the price at which the bitcoin was purchased.
“Historically this has looked like a bitcoin bottom, with both short-term and long-term holders now on average submerged,” he tweeted on September 26, 2022.
However, he cautioned that a significant sell-off could still occur if Bitcoin sold alongside other stocks, which appears to have happened as the dollar regained strength later in the day.
“BTC appeared to be catching the risk sell-off once again today. Ecosystem supporters have been excited that correlations with risky assets are starting to break, meaning the speculative ‘quick buck’ crowd may be losing its grip on the space,” said Stephane Oullette of FRNT Financial.
Correlation between bitcoin and exchange high
Cryptocurrencies and stocks have been chasing each other lately as central banks wielded machetes to fight inflation. According to Bloomberg data, the correlation between the S&P 500 and Bitcoin hit 0.69 today. A correlation coefficient of one means the two are in perfect harmony, but 0.69 is among the highest readings since 2010.
Other macroeconomic factors have also come into play recently, causing Bitcoin to behave more like the stock market.
Both stocks and crypto were hit when the August 2022 inflation figures were released in September 2022, with Bitcoin and Ether giving up recent accrued gains, falling 6% and 8% in intraday trading following the announcement. Stocks like Microsoft (MSFT), Google (GOOG) and Apple (AAPL) also saw red.
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