Inverse Correlation Between Stock Anxiety And Crypto Investment

By Nicolas Abington | Crescent City Capital Market Analyst Intern

Recently we’ve been able to see a trend involving the inverse relationship between crypto investment and stock prices. Recently the DOW Jones Industrial Index took an 840 point (-3.14%) drop over the course of two trading days. During that same period, crypto prices either remained constant or received a healthy price boost after a bearish period from the previous week. For example, BTC/USD had a 5.91% and ETH/USD a 4.99% rally over the period. A moderate opportunity for the day traders that noticed, but what could this mean for those thinking farther in the future.

While this trend is important for trading, it says even more about how the investor envisions crypto as an investment option. According to Ryan Strauss from The Balance, he argues that Bitcoin is a Macro-economic hedge in comparison to traditional assets due to its independence from pressures such as end-of-quarter reporting, company performance, and institutional confidence of public stakeholders. Having major cryptocurrencies like BTC, LTC, and ETH be completely decentralized creates a safe haven during an economic downturn, making it a comparable asset to gold or bonds. As countries like the US begin to move out of the peak in the business cycle, and mass adoption increases, we may see those investors looking for safe havens turn towards one of the most historically volatile asset classes to date

Until there is more solidified evidence proving an inverse relationship between the two asset classes we should take this trend with a grain of salt. That being said, as we head towards recessionary periods we should all take notice to how long term investors use cryptocurrencies.

Sources

https://www.tradingview.com/chart/pNCwGfF5/

https://www.marketwatch.com/investing/index/djia

“Should You Invest in Stocks or Bitcoin?”-Ryan Strauss-9/19/2019

https://www.thebalance.com/should-you-invest-in-stocks-or-bitcoin-4121151

“U.S. Stocks Drop on Worries About Growth”-MaxBerdinand-10/02/2019

https://www.wsj.com/articles/global-stocks-fall-amid-rising-fears-of-economic-slowdown-11570004904