Crypto Market Showdown: US Stocks Dwindle, Will Bitcoin Follow Suit?

The recent report of a decline in the US stock market has caused considerable unease among investors. Several prominent stocks have experienced significant drops, with some witnessing nearly a 20% decrease in value. Coinbase Global, Inc. (COIN) stands out as its stock price has fallen by more than 5%.

As the market closed, the SPX500 faced a notable downturn, with its price decreasing by nearly 1% to reach $4,151 early the next morning. Bitcoin is riding high with bullish sentiments, whereas the grim reality differs. There are more potholes, and fake news can give a temporary pump. Will this surge last long? Here’s the breakdown of the current market status. 

SPX Downfall Calls for Something Special?

The recent decline in the SPX has led to what traders call an “exhaustion gap.” Such a gap typically forms after a price pattern and often represents a final attempt to establish new lows. In this case, the gap could be considered a potential exhaustion gap, as the market opening at $4,167 is lower than the previous day’s close at $4,186. Past instances of exhaustion gaps have demonstrated mixed outcomes for Bitcoin’s price.

A significant factor to consider is the correlation between the SPX and Bitcoin, which currently stands at -0.65. A negative correlation implies that when the SPX rises, Bitcoin is likely to fall and vice versa. While this might suggest a potential increase in Bitcoin’s price due to the SPX’s recent decline, it’s important to note that this doesn’t always hold, as evidenced by the August 2 gap when Bitcoin saw a sharp decline despite a similar correlation.

But Crypto Downturn Has Its Own Story

Interestingly, the downward trend isn’t limited to traditional stocks; it has also affected cryptocurrency-related stocks like Coinbase. As of the most recent data, Coinbase is trading at $73.41, more than 5% below the previous day’s close. This drop places Coinbase’s price in the middle of its trading range, fluctuating between $66 and $80 since the beginning of August.

What’s Driving the Current Dynamics?

The recent Bitcoin surge signals a seismic shift in investor sentiment. As high-net-worth individuals and institutional investors pivot towards Bitcoin, the landscape of traditional and digital assets might undergo a significant rebalancing. Historically, robust Bitcoin performances have heralded extended bull runs, potentially heralding the onset of a broader crypto market upswing. However, it’s crucial to note that this surge has somewhat overshadowed altcoins, potentially curtailing their independent rallies due to Bitcoin’s dominant presence of over 52%.