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Bitcoin is seeing a strange correlation with gold and Down Jones

Bitcoin and gold had the same upward movement on Monday as investors hoped the central bank would stimulate the economy through new programs.

The BTC / USD exchange rate rose 2.26%, reaching an intraday high of $ 8,842 after the European session opened. At the same time, CME futures associated with the pair also increased 3.57%, signaling psychology of increasing prices at the beginning of the new week.


Bitcoin CME Futures starts the week in positive territory | Source: TradingView

Besides, gold also increased similarly with 1.56% to trade at 1,611 USD / ounce. Its futures on COMEX also increased by 1.89%, a move in contrast to the crazy and chaotic situation last week.

The correlation is easy to understand

Indeed, both gold and Bitcoin have been underperforming during times when traders think they will make a lot of profit. The market has weakened due to the Corona virus spreading to countries other than China. Traders went from one shock to another when the market was massively sold out, because Bitcoin and gold were impressive before the US-Iranian military tensions in January.

The low reliability comes mainly from stocks and bond yields are also decreasing. Traders see Bitcoin and gold as paradises against chaos in the current risk context. But it all dropped, indicating that investors were speculating on Bitcoin and gold: Buying low and selling high.

"The yield curve and US Treasury bonds plunged. The stock market is going down, but the real threat lies in the bond debt bubble… Buying gold and Bitcoin ".

According to experts, big traders may have sold Bitcoin to get cash, because they want to compensate for losses due to stocks and other markets. The same sentiment emphasizes that gold has been sold to small investors at the highest level in 7 years.

That makes the market arose the most buying behavior. Therefore, both Bitcoin and gold do not function as a safe haven.

Bitcoin and gold prices are about to recover?

Despite falling with stocks and 10-year Treasury bonds, both Bitcoin and gold can move from a slight upward move to a sustainable upward correction.

Central banks across the globe suggestions will announce new stimulus packages. For example, the Bank of Japan said it would inject cash liquidity into the financial system to offset the impact of the Corona outbreak. Italy promised to add 3.6 billion euros for the same purpose.

Meanwhile, the Reserve Bank of Australia (RBA) is expected to cut interest rates on Tuesday. Investors also expect the US Federal Reserve to drop 50 basis points in March.

“The Reserve Bank of Australia plans to announce a rate cut at its Council meeting on March 3 to cope with the Corona virus crisis.”

Strengthening stimulus programs can be the basis for both gold and Bitcoin. Over the past 12 months, Bitcoin has risen impressively with more than 100% before halving in May 2020.

Dow Jones rose when stock market suffered losses throughout the week

Traditional investors have been abuzz with news of the deadly spread of the deadly COVID-19 virus, reflected in stock market price action seen over the past week.

During the last week of February, the Dow Jones retreated from a high just below 30,000 to a Friday low of 25,400, the worst since the 2008 financial crisis.

Naturally, this has caused panic among traditional investors, with fears of an imminent recession when rumors regarding the economic impact due to Corona are constantly being discussed.

However, the market today has encountered a backlash from buyers, pushing the Dow Jones index up more than 5% to 26,703, with most other major indices also up 4% or more.

It is currently unclear whether this will fundamentally change the structure of the market but if it is called a “dead cat rally” price action in the coming days and weeks will be clear.

Bitcoin moves along with the global stock market, or he is a safe haven asset

Bitcoin's price action throughout the week was very similar to the global stock market. In particular, the top cryptocurrency dropped from a high of $ 10,000 last Sunday to a low of $ 8,400, before rising to a high of 8,900 this morning.

Crypto analyst Michaël talked about Bitcoin's correlation with global markets in a recent tweet:

"Meanwhile, the stock market increased sharply today.

Not only the stock market, commodities are also stable and oil is rising.

It is interesting to see how BTC and cryptocurrencies react, as the price move has also recovered well today. "

If the correlation remains strong in the coming days and weeks, it could cause trouble for Bitcoin's “safe digital paradise” story that many investors have claimed to be the root of. so its financial value.

You can see the price of Bitcoin here.

Disclaimer: This is not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

Minh Anh

Bitcoin Magazine

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