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Stocks Steal Spotlight From Bitcoin Despite Market Crash Warnings

Sead Fadilpašić
Last updated: | 3 min read

Stock market seems to have stolen some attention from bitcoin (BTC), with young investors turning to equities. But as many expect a sharp correction and more volatility ahead, crypto analysts wonder what this would mean for the world’s oldest crypto.

Source: Adobe/arekmalang

“So far bulls are in charge,” writes Bloomberg, as stocks regain USD 21 trillion in value since the drop in March. For the US specifically, the easing of lockdowns, positive employment numbers, and “a wall of money from the guardians of global economies,” are among the factors leading to an increase in buyers. However, many worry that this may be a bear market bounce, and that the future holds more volatility over the short term, with some investors now increasing hedges.

What happens to equities may matter for BTC as the two showed a strong correlation leading up to the March crash and immediately following it, though this correlation is constantly being questioned.

BTC and S&P 500 correlation chart (90-day moving average)

Source: Coin Metrics

However, already a month ago, major names in finance were raising the alarm that stocks are vastly overvalued. Back then, analysts told that BTC would feel the impact, but, this time, there is a chance it might be different.

In June, when it comes to stocks, “the risk of a correction will rise if investors continue to price in a rapid recovery, especially for sectors that are vulnerable to another wave of infections or an escalation of tensions between the US and China,” Tai Hui, Chief Asia Market strategist at JPMorgan Asset Management is quoted as saying. Bloomberg also quoted a note from Rabobank, saying: “If everyone is holding stocks just to pass on to the next greater fool, and if the greatest fool is a central bank with infinite liquidity to buy them, then, yes, prices will keep going up.”

Yoni Assia, CEO of major social trading platform eToro expects that somebody selling their position will crash the equities market in the next three weeks. Trader and analyst ‘BTC_JackSparrow’ tweeted that the stock market is reaching a top soon, and wondering what would happen to BTC if stock were to see a large correction. “It’s been my theory since pre-capitulation that BTC would dip with the stock market,” he says, “as the order flow suggested a huge amount of bulls trapped before [the crash], and then decouple but BTC still hasn’t proven itself to be risk-off.”

Meanwhile, people are flocking to stock trading app Robinhood to buy penny stocks. Commenters say that young investors are buying stocks of dying companies and not BTC, meaning that the coin won’t pump soon. “We really have become digital gold – sound money for not-so-olds,” writes Brian Lockhart, Product Management leader at Casa.

As reported, the trading volumes for BTC and ethereum (ETH) both decreased by 5% and 2%, respectively, during the month of May. However, much of this volume has instead moved into more volatile altcoins.

Meanwhile, Ran NeuNer, CEO of Onchain Capital, a crypto investment and advisory business, tweeted that “trading the stock market these days is so much more fun than Crypto!”, drawing a number of reactions. “When you start to see comments like this, the top is near – brace for impact,” says analyst Teddy Cleps. Popular crypto investor WhalePanda said the comment is exactly why he dumped the majority of equities after being up 80% on the portfolio since March.

At pixel time (11:44 UTC), BTC trades at USD 9,753 and is unchanged in a day. The price is up by 1.5% in a week and 10% in a month.

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