Bitcoin (Source = Union)

Bitcoin’s ‘coupling’ to the $38,000 level… Deepening of ‘coupling’ with Nasdaq

Bitcoin (Source = Union)

On April 27, Bitcoin plummeted to the $38,000 level. On the same day, the US Nasdaq Index also fell 3.95%, indicating that the coupling (synchronization) between Bitcoin and the US Nasdaq Index is deepening.

According to CoinMarketCap, a cryptocurrency trading site, the price of Bitcoin as of 1:30 pm was $38,321.21 (about 48.4 million won), down 5.44% from 24 hours ago. At one point in the morning, it plunged to $37,969.80, down 11.44% from the recent 7-day high of $42,878.45.

In early this month (April), the news that more than 90% of the mining was done raised the scarcity of bitcoin, and as the US stock market rose, it rose to 57.05 million won in the Korean cryptocurrency exchange Bithumb, raising expectations for a ’60 million won re-breaking’. However, as the US Federal Reserve (Fed) suggested a reduction in the balance sheet and a big step (0.5%p) rate hike, the US stock market and Bitcoin both drew a downward graph. Amid the Fed’s aggressive rate hike and the volatility of big tech stocks, the Bitcoin price and the Nasdaq index are showing a deeper synchronization than before.

Arcane Research, a blockchain data research company, judges that the correlation between Bitcoin and the traditional financial market has increased from July 2020. As the COVID-19 pandemic continues, governments around the world are releasing money to the market and lowering interest rates to stimulate the economy. As risky assets are preferred due to abundant liquidity, investment in virtual currency has flowed. According to Bloomberg data, the 40-day correlation coefficient between the Nasdaq 100 index and the Bitcoin price on April 8 reached a high of 0.7. In January, it was 0.4. The correlation coefficient closer to 1 means stronger synchronization.

In fact, in April, we compared the ‘close on the 26th compared to the Nasdaq 100’s closing price’ and ‘the close on the 26th compared to the highest closing price of Bitcoin’. The Nasdaq 100 high index fell 14.18% from $15,159.58 on April 4 to $13,09.71 on April 26, while Bitcoin also fell 18.24% from $46,622.67 to $38,117.46 during the same period. The date of recording the highest index and the highest price, respectively, is the same as April 4th. Also, considering that Bitcoin is a risky asset and has greater volatility than the traditional financial market, the decline did not differ significantly, recording a similar downward trend.

The link between the Bitcoin price and the Nasdaq index is expected to continue for the time being. Arcane Research Diagnosed that “The widespread financial market fears caused by COVID-19 have had a direct impact on Bitcoin’s yields” .

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