Bear Market Sees Bitcoin and S&P 500 Plummet in Tandem

Updated by Ryan James
In Brief
  • Bitcoin ceded early gains as it plummeted in tandem with stocks around midday on Sep. 27, 2022.
  • The stock market has experienced a bear market in the last five days.
  • Despite one analyst believing bitcoin as bottomed, macroeconomics have proven too significant too ignore.
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Major stock market indices tanked on Sep. 27, 2022, taking bitcoin down with it.

Bitcoin erased gains accrued earlier in the day due to a slight weakening of the dollar, rallying to $20,338.88 early on before tumbling to $18,902.66 at the end of the trading day. Ethereum also dropped from a 24-hour high of $1,397.29 to $1,238.84. By 1:45 pm New York Time, most digital assets had declined.

The S&P 500 ticked to new record lows for 2022, dropping 0.5% from the last intra-day record of 3,636 in June 2022. The Dow Jones Industrial Average fell 200 points after gaining 400 earlier in the trading day.

“The fact that we lost support at both 3900, 3800 and certainly made a beeline to the June lows tells you that the risk-off environment hasn’t changed much over the course of the last six weeks,” opines Art Hogan of B. Riley Financial.

The most recent stock market movements round off a five-day losing streak for stocks. The Dow Jones Industrial Average lost over 300 points on Sep. 26, 2022, 20% below its all-time high.

BTC rallied before tanking with major stocks

Before its latest plummet in late trading on Sep. 27, 2022, bitcoin soared to levels not seen since mid-Sep. 2022. “Bitcoin is staging a remarkable recovery amid a mild reprieve elsewhere on Tuesday which will no doubt excite a crypto crowd after another rough period. Turmoil elsewhere appears to have lifted Bitcoin, which has largely traded as a high-risk asset,” stated Craig Erlam of broker Oanda.

UTXO Management crypto analyst Dylan LeClair commented that this sign indicated that bitcoin had bottomed, using the cost basis of long and short-term holders as a yardstick. The cost basis is the price for which the bitcoin was purchased.

“Historically, this has been the look of a Bitcoin bottom, with both short-term and long-term holders now being underwater on average,” he tweeted on Sep. 26, 2022.

But he cautioned that a significant sell-off could still occur if bitcoin was sold together with other stocks, which seemed to have happened as the dollar regained its strength later in the day.

“BTC did seem to pick up the risk sell-off once again today. Followers of the ecosystem have been excited to see correlations with risk assets begin to break, meaning that the ‘fast-money’ speculative crowd may be losing their influence on the space,” opined Stephane Oullette of FRNT Financial.

Correlation between bitcoin and stock market high

Cryptocurrencies and stocks have recently tracked each other as central banks wielded inflation-taming machetes. According to Bloomberg data, the correlation between the S&P 500 and bitcoin hit 0.69 today. A correlation coefficient of one implies that the two are in perfect harmony, but 0.69 ranks among the highest values seen since 2010.

Other macroeconomic factors have also entered the fray recently, causing bitcoin to behave more like the stock market.

Both stocks and crypto took a beating when inflation numbers for Aug. 2022 were released in Sep. 2022, with bitcoin and ether ceding recently accrued gains to drop 6% and 8% in intraday trading following the announcement. Stocks like  Microsoft (MSFT), Google (GOOG), and Apple (AAPL) also saw red.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here

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