Cryptocurrencies have not responded to the stock market crash. Why does it matter?
The correlation between Bitcoin’s price and the share price of big tech companies is falling sharply. This week was the reporting season for many of the giants, which led to a massive drop in their share prices. During the same period, the BTC price has remained relatively stable and even slowly moved upwards. Consequently, cryptocurrencies avoided another collapse as a result, which seriously strengthens their position in the eyes of many investors. Let’s take a closer look at what’s happening and its importance.
It’s worth noting that the coin industry is now seeing a trend of moving digital assets to third-party wallets outside of exchanges – something that is usually done to store them for the long term. Proof of this was the withdrawal of more than 55,000 bitcoins from the Binance exchange on Wednesday.
IntoTheBlock representatives also reacted to the event. They reported that a total of more than 70 thousand bitcoins worth the equivalent of $1.52 billion were withdrawn from cryptocurrency exchanges on October 26. They added the following graph to the news.
Volume of bitcoin withdrawals from cryptocurrency exchanges
What are the advantages of Bitcoin?
Over the past few days, Bitcoin has entered a new price corridor: the price of the main cryptocurrency now fluctuates between $20,000 and $21,000. A sharp spike in volatility and a local uptrend on the chart began to form on October 25.
Bitcoin chart over the past few days
Today Bitcoin is trading at $21,000. At the same time, the value of Etherium managed to overcome the $1,600 mark. The largest altcoins by market capitalisation also showed mostly growth during the week.
Situation with cryptocurrency rates today
But shares in the technology sector showed the opposite dynamics. The fall in the value of Amazon securities stood out, with a 20 percent drop in over-the-counter trading – a record in the tech giant’s history. In doing so, Amazon’s capitalisation plunged by $230 billion in just a couple of minutes.
Amazon’s stock plunge
The company’s third quarter report this year was commented on by its CEO Andy Jassy. Here’s the company executive’s rejoinder.
There’s obviously a lot going on in the macroeconomic environment and we will balance our investments to optimise the business without compromising our key long-term strategic objectives.
Meta securities showed a similar collapse after the reports. According to Cointelegraph’s sources, Meta’s share price has fallen to its lowest level since 2015.
Meta’s share price has fallen
It should be noted that Meta CEO Mark Zuckerberg's fortune was also affected in this situation. As noted by analysts, the amount of funds in his possession fell by $100 billion from its peak just a year ago. At the same time, this result is the largest loss of fortune by a single person in history.
Despite this, Mark Zuckerberg’s company is paying special attention to the issue of developing meta-universes, although it is constantly suffering huge losses in this area.
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The stock market woes have bypassed the crypto: apart from the usual intraday volatility in trading, Bitcoin has not seen any more rapid declines this week. That is, the cryptocurrency’s correlation with equities is declining, and economist Alex Krueger tweeted about it. Here is his rejoinder, in which the expert shares his view of the situation.
Last January, Netflix’s earnings report and the subsequent 20 percent drop in the company’s stock led to a similar 20 percent drop in BTC and 30 percent drop in ETH. Today, Amazon’s earnings report and the subsequent 20 per cent stock crash led to a similar drop of 2 per cent in BTC and 3 per cent in ETH. “Weak hands” have left the market.
What Krueger means is that there are simply no traders left in the crypto market who would be able and willing to sell a significant amount of assets at the slightest panic. This is a good thing, because such a sign indicates the beginning of the formation of a long-term bottom. However, crypto is not yet fully independent in terms of price dynamics, and anything can always happen in the market.
This week there was no clear closed movement between BTC and stocks, but the long-term trend of Bitcoin correlation with S&P 500 stock index is still far from a global decline. This can be seen in the chart below.
Bitcoin and S&P 500 correlation
The stock market turmoil is still in a position to play a cruel trick on cryptocurrencies. However, it is the US Federal Reserve’s policy that has received the most investor attention. The Fed is now steadily raising the benchmark lending rate to fight inflation, but once that rate reverses, there is a strong chance of a rise in all markets.
However, so far there are no signs of this happening. The Federal Open Market Committee (FOMC) will meet again on 2 November. The key rate is expected to be raised by 75 basis points, i.e. exactly as it was done in summer and September. However, analysts at Goldman Sachs assume that in December and February the increase might be 50 and 25 basis points respectively, which would indicate an easing of pressure on the economy.
We believe this trend in cryptocurrency behaviour will have a positive impact on its reputation. Still, why would investors want to get involved with the tech giants' regularly falling rates when at the same time the coins are showing tens of percent growth on a weekly basis? Obviously, over time, this will attract new people to the crypto niche, and their purchases can make the growth of digital assets even more tangible.
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