Bitcoin Is Co-Related with Stocks – Is It a Myth or Reality?
Since the day it has been introduced in the world, Bitcoin, which is the first ever digital asset more commonly known as “cryptocurrency”, has remained in the news on daily basis. There is hardly a day when there is no news coming from this cryptocurrency pioneer. Whether it be relating to fluctuation of its price or that a billionaire has brought huge piles of Bitcoins or that a fraud has been committed in the hot wallets of Bitcoin holders. One way or the other it has been in the news at all times.
It really does not matter what the nature of news is. At the end of the day, people get to know about the biggest cryptocurrency of the world in one form or the other.
Interestingly with so many ups and downs in a year, Bitcoin successfully dominates the entire cryptocurrency industry though now there are more than thousand cryptocurrencies available in the market. However, still it is adored by millions of investors worldwide for being one of the most lucrative digital assets out there.
Bitcoin and Stocks
On the other hand, another dominating trading product which belongs to the traditional market is stocks. It seems that a large pool of investors are fond of trading in stocks and this is true because most recently, giant companies of the world like Tesla, issued 1 for 5 shares. What it means is that a person who buys 1 share will get a total of 5 shares. Apart from that, stocks are also a product that guarantees handsome returns. But one might think what the correlation between two totally different asset types is.
The Argument for the Correlation between Bitcoin and Stocks
Well, to cut the story short, there is a widespread belief amongst the financial industry that both, Bitcoin and Stocks, are intertwined with each other. The argument is backed by the phenomenon because time and again it has been seen that when the prices of stocks have gone up, there was a simultaneous increase in the value of Bitcoin. Similarly, for example if the prices of stocks in the global market are gone down then there is a downfall in the price of Bitcoin too. Due to this fluctuation which can be seen within both at the same time, further strengthen this argument that irrespective of the fact that both are completely different assets type yet there is direct co-relation between the two.
Evidently Bitcoin is supposed to be different from any traditional type of asset but yes one cannot ignore its co-relation with stocks. In the month of July this year, there can be seen huge co-relations between the two assets which were recorded to their highest ever. Some argue that due to this co-relation of Bitcoin with the assets of traditional markets shows that Bitcoin is emerging as a mature asset
However, for the time being, the reason for this growing co-relation can be attributed with the ongoing crisis caused by Covid-19. This may be true because due to worldwide lockdowns imposed in the earlier months of this year led to closure of traditional markets and only the online markets were available.
The Current Situation with Stocks and Bitcoin
When traditional markets were allowed to resume their normal course of business for limited number of hours in a day, the consequences were obvious i.e. the prices of every asset within the traditional market went down and so are the stocks. But those who have bought the stocks on cheaper rates during lockdowns, have managed to sell their stocks for a considerable profit. Since then both asset classes are seeing an upward trending where the value of Bitcoin keeps on fluctuating but whenever there is an increase, the stocks also showed the same results. So it will not be wrong to suggest that the consequences caused by Covid-19 increased the co-relation between stocks and Bitcoin.
Without any iota of doubt, both are completely different from each other and have no co-relationship with each other. There are also people who strongly believe that Bitcoin is more co-relatable with Gold but that is not true. All these are misbeliefs.