Stocks are yielding more returns than Bitcoin in August so far. Where is the crypto leader headed?

On Thursday, the Nasdaq Composite traded at 12,982.46, up 44.34 points or 0.34% around 12:09 p.m. EDT. The index moved closer to 13,000 marks and reached an intraday high of 12,996.14. The index had crossed more than 13,100 levels earlier this week.

Including Thursday’s peak, the tech-heavy Nasdaq Composite is up about 5% so far this month. The weekly increase is around 2%. While in a month the upside is more than 14%.

Also, the S&P 500 index was a couple of points away from the 4,300 mark today. It has reached an intraday high of 4,288.03. While the Dow Jones approached the 33,400 level after clocking the day’s high of 33,993.87.

Both the S&P 500 index and the Dow Jones are up around 4% so far in August considering today’s high. The S&P 500 has risen over 11.5% in a month, while the Dow Jones climbed over 9%.

The US market is still trading. It’s not just the US market, even Indian stock benchmarks have outperformed Bitcoin.

In the Indian market, Sensex closed at 60,298 and Nifty 50 at 17,956.50 with marginal gains. However, so far in August, the Sensex and Nifty 50 have risen by 3.75% and 3.5% respectively. In a month, from July 18 to Thursday, the Sensex has soared by as much as 5,530.38 points or 10.10%, while the Nifty 50 has risen by 1,615.95 points or 9.9%.

When it comes to Bitcoin, according to CoinMarketCap, Bitcoin is currently trading at $23,460.41 marginally up. Its weekly decline is around 4%, while in a month, the crypto has jumped a little over 1%.

Meanwhile, according to Coingecko, Bitcoin has advanced nearly 2.6% in 14 days.

Thus, Bitcoin has underperformed compared to the Nasdaq Composite.

The relationship between Bitcoin and stocks:

Earlier this week, analyst Vetle Lunde at Arcane Research said in his report that BTC’s short-term correlation to the broader financial markets has fallen toward annual lows, with BTC underperforming the Nasdaq. He added, the correlation between BTC and stocks is likely caused by a myriad of forces, mainly related to BTC being seen as a risk asset by professional investors, in addition to BTC’s relationship to general liquidity and monetary policy.

Lunde highlighted three forces. First, the reduction of BTC holdings by large public companies such as Tesla. Secondly, forced sales by miners on the basis of increased interest rates and energy prices.

Third, he pointed out that previously easy access to private funding and a sharp focus on growth of crypto companies amid the fertile bull market conditions of 2020-2021. This was followed by a very sobering hangover related to increased capital costs and general reduction of access to private funding for growth-oriented private crypto companies, which created the perfect conditions for the May and June meltdowns.

In particular, Bitcoin has also suffered from a cautious sentiment in the crypto market following the collapse of Terra Twin Sisters and the liquidation of Three Arrows Capital where investors have lost billions of dollars. The liquidity crisis in cryptocurrency exchanges has also forced some to suspend wallet withdrawals while freezing investors’ money, while some choose bankruptcy or seek other investment proposals for recovery. The market is still affected by these shocks, and it has affected sentiment to some extent.

“Nevertheless, BTC’s current 30-day correlation to the Nasdaq remains high at 0.55. Automated trading strategies and the well-known associated correlation between bitcoin and other risk assets may act as a self-fulfilling prophecy in the coming period. The aforementioned soft correlation strengths may not be strong enough to lead to a structural shift in this trend,” added Lunde. He also pointed out that bitcoin and gold have been largely uncorrelated since May.

Where is Bitcoin headed?

About Malviya, President of Tezos India said, “Cryptocurrencies and equity markets are generally correlated as the factors that affect the prices and the investors/traders of both follow similar trends. Globally, traditional investors are flocking to equities as compared to crypto considering the volatility of the latter. They will like to see the crypto market rise steadily for a while before they make any decisions to actively start investing as they usually do in stocks.”

“Bitcoin has always broken its previous highs, and we expect the same to happen as and when the market and inflation situation continues to improve. This is the time to continue accumulating bitcoin in different price ranges, according to the individual’s risk appetite,” Tezos president. added.

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