In December, traders’ investment in the cryptocurrency market has been comparatively better than what it was on Wall Street, as demonstrated by the relative performance of the Bitcoin price and S&P 500 index.
Bitcoin underwent an impressive bullish correction after falling almost 85% from its all-time high near $20,000. The price at the beginning of December established an interim bottom level at $3,127 before jumping towards its monthly high near $4,237. That totaled its correction to almost 35.5%.
The S&P 500, on the other hand, was already undergoing a downside correction after establishing its 52-week high at 2,940.91. As December kicked in, the index noted ten back-to-back daily selling sessions during mid-term — causing a crash of almost 20% from the recent peak, its lowest since April 2017.
The S&P’s sister indexes, Dow Jones and Nasdaq, also plunged significantly within the same timeframe. The trio together came closer to record the worst monthly crash since October 2008, during the time of the financial crisis.
Overall, The S&P 500 slumped 19.8% by Tuesday from its September 20 record close. The Nasdaq and the Dow depreciated 23.3% and 18.8% from their record closes set August 29 and October 3, respectively.
The fundamentals of both Bitcoin and S&P are quite distinctive from each other. While Bitcoin is a standalone asset, which is traded mainly via retail and OTC markets, S&P is a market capitalization index of the US’s biggest public-traded corporations by market value. Each market was responding to its specific catalysts, without establishing any definitive correlation with the other.
Bitcoin, for instance, corrected all this year after overreaching its upside targets without confirming real demand. Along with Ethereum, it was used as a method to raise funds to many young blockchain startups that eventually failed without making the product they intended to make. Some of them even turned out to be vaporware or outright scams. This and other factors finally increased the selling pressure on the Bitcoin market and caused a huge plunge.
The cryptocurrency only recently found a temporary bottom, which influenced speculators to accumulate the asset at lower prices. The crypto market is eyeing 2019 to be the year of BTC’s institutional adoption, which influences the traders within it to “buy the dips” and hold the digital currency unless their respective upside target is established.
Unlike Bitcoin, the S&P 500 is reacting to macroeconomic factors, ranging from Fed interest rate hikes to global political scenarios rooting from the Trump administration. A recent tweet from US Treasury Secretary Steven Mnuchin on Tuesday revealed that he was in talks with the CEOs of the Untied States’ six biggest banks. It led to a pessimistic market sentiment over the liquidity among these institutions.
The ongoing US-China trade war is also heading into a blank despite the assurance from both Washington and Beijing. A vice presidential-level meeting between the two powerful economies, as reported on Sunday by the South China Morning Post, hinted positive outcomes. But it wasn’t enough to reinject optimism into the US stock market.
The S&P is expected to consolidate until the new year kicks in. Most of the traders and stockbrokers are away from their desks during the holiday season, which is likely to reduce the volume in these markets.
Despite being the two distinctive asset classes altogether, Bitcoin has proven to be better in terms of return of investment this month.
Featured Image from Shutterstock. Charts from TradingView.
Last modified: June 14, 2020 11:22 AM UTC