Here’s why the Crypto Market is seemingly in a “love affair” with the Stock Market

Since bitcoin launched 14 years back, the crypto market has always gone in the opposite direction of equity markets and larger economic trends.

For example, BTC fell 61% in 2014 when S&P 500s were doing an 11% upswing.

The same thing also happened the following year, with BTC enjoying a 35% increase and S&P 500 dropping nearly 1%.

You’d think crypto might be a valuable hedge against inflation and other funny market movements.

Much like the gold standard, right? Right?

Well, the current crypto winter has disputed this “crypto wisdom,” and here’s why.

It all started when the Feds injected more liquidity into the market during the COVID-19 pandemic.

Plus, they reduced interest rates to near-zero percent.

Everyone had some extra cash to play around so regular folks and big-time investors channeled them into riskier investment portfolios.

This included Tech stocks and BTC, further tightening the “love affair” between the two.

The 2020–2021 crypto bull run differed from earlier surges because of institutional acceptance from Tesla, Visa, JPMorgan, and Ray Dalio.

To further strengthen the relationship between crypto and traditional markets, the first-ever bitcoin-futures ETF launched in October,

This made it easier for institutions to invest in crypto indirectly, making BTC more susceptible to external market impacts.

The result? A 30% loss for NASDAQ and a 60% loss for BTC and ETH since the price peaks in November.

The Wall Street Journal revealed last month that BTC, ETH, and U.S. stock indexes had a historic three-month “relationship” — more than triple the average from 2019 to 2021.

Is there hope?

While it seems like crypto is about to meet its fate in the hands of the White Walkers, there’s still some hope.

For one, we’re expecting regulatory clarity from the Biden administration soon.

Secondly, Ethereum’s move to a proof-of-stake consensus mechanism might give the market the boost it needs to recover.

Though, the developers are delaying the Difficulty Bomb for two extra months.

How do you think these events will affect the overall market?

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