Bitcoin falls below $20,000 as S&P 500 collapses
Important takeaways
- Bitcoin rose above $20,000 today, but then erased its gains.
- The top cryptocurrency’s price action was likely influenced by the S&P 500 breaking summer lows.
- Bitcoin and other crypto assets have traded in close correlation with stocks throughout this year.
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Bitcoin rose more than 5% today, but is now trading in the red. The price action is likely correlated with the S&P500 trading at its lowest level since November 2020.
S&P 500 Drags Bitcoin Down
Bitcoin rallied today, but it erased the gains as the stock retreated.
The top crypto showed signs of life today after passing $20,000, but it has since recovered all of its gains. According to CoinGecko data, Bitcoin is trading at $19,014, down 0.2% today. Bitcoin’s initial bounce met resistance in the $20,350 area, which has served as an important level since it dropped from $25,000 in mid-August.
Bitcoin’s rise and fall can probably be explained by the recent sell-off in stocks (The crypto market has shown a high correlation to traditional markets throughout this year). S&P 500 hit 3,631 after a 0.71% decline today, its lowest level since November 2020. The Nasdaq Composite has yet to follow suit, trade about. 200 points above the summer’s lowest level. The Dow Jones, meanwhile, has made new lows throughout this month.
2022 has been one of the worst years in US stock market history, largely thanks to the Federal Reserve‘s commitment to raise interest rates aggressively to curb inflation. The S&P 500 is down 24.3%, the Nasdaq 32.88% and the Dow Jones 20.79% since hitting all-time highs in January. The US central bank announced a third consecutive 75 basis point rate hike earlier this month, and Fed Chairman Jerome Powell has repeatedly indicated that it plans to maintain its hawkish stance until inflation falls to 2%.
The crypto market’s reaction to Bitcoin’s move has been muted so far. ETH has shown marginal resilience; it is currently trading up 0.2%. Ethereum has lagged behind Bitcoin since the network completed its Proof-of-Stake “merger” on September 15, a long-awaited upgrade that turned out to be a ‘sell the news’ event. Per TradingView data, ETH/BTC has slipped down to 0.069 after hitting a 2022 high just ahead of the merger. ETH/BTC has traded in the range from 0.05 to 0.085 since May 2021.
Disclaimer: At the time of writing, the author of this piece owned BTC, ETH and several other cryptocurrencies.
