Stocks have outperformed bitcoin in August so far. what is next

on Thursday, Nasdaq The composite index is trading up 44.34 points, or 0.34%, at 12,982.46 at around 12.09 p.m. EDT. The index touched the 13,000 mark and touched a high of 12,996.14. Earlier this week, the index had crossed the level of over 13,100.

In keeping with Thursday’s highs, the tech-heavy index Nasdaq Composite is up nearly 5% so far this month. Its weekly profit is around 2%. Whereas the upside is more than 14% in a month.

Moreover, the S&P 500 index was a few points off the 4,300 mark today. It has touched an intraday high of 4,288.03. While the Dow Jones touched the day’s high of 33,993.87 and reached near the level of 33,400.

The S&P 500 index and the Dow Jones have both gained about 4% so far in August, if their day’s highs are taken into account. The S&P 500 is up more than 11.5% in a month, while the Dow Jones is up more than 9%.

America Market Still trading. Not just the US market, even the Indian equity benchmark has outperformed bitcoin.

In the Indian market, the Sensex closed at 60,298 and Nifty 50 at 17,956.50 with marginal gains. However, so far in August, the Sensex and Nifty 50 have gained 3.75% and 3.5% respectively. In a month, from July 18 to Thursday, the Sensex has gained 5,530.38 points or 10.10%, while the Nifty 50 is up 1,615.95 points or 9.9%.

Speaking of bitcoin, according to CoinMarketCap, bitcoin is currently trading at a slight uptrend at $23,460.41. Its weekly decline is around 4%, while the crypto has jumped a little over 1% in a month.

Meanwhile, according to Coingecko, bitcoin is up about 2.6% in 14 days.

Thus, bitcoin has underperformed compared to the Nasdaq Composite.

Correlation between bitcoin and stocks:

Earlier this week, Arcane Research analyst Vetel Lunde said in his report, BTC’s short-term relationship to the broader financial markets has fallen to yearly lows, with BTC underperforming the Nasdaq. That said, BTC’s correlation to equities could be due to a number of forces, which mostly see BTC as a risk asset by professional investors, in addition to BTC’s relationship to general liquidity and monetary policy.

Lunde highlighted three forces. First, the reduction of BTC holdings from large public companies such as Tesla. Second, extorting miners against the backdrop of rising interest rates and energy prices.

Third, he pointed out that in the midst of fruitful bull market conditions in 2020-2021, ease of access to private funding and a sharp focus on growth by crypto companies. This was followed by a very severe hangover related to rising cost of capital and a general lack of access to private funding for growth-oriented private crypto companies, creating the perfect conditions for the May and June recessions.

Notably, after the collapse of the Terra twins and the liquidation of Three Arrows Capital, where investors have lost billions of dollars, bitcoin has also faced cautious sentiment in the crypto market. Furthermore, the lack of liquidity in cryptocurrency exchanges has forced some to suspend withdrawals to their wallets, freezing investors’ money, while some opt for bankruptcy or seek other investment proposals for recovery. Huh. The market is still scared of these shocks and it has affected sentiments to a certain level.

“Nevertheless, the current 30-day correlation of BTC to the Nasdaq remains high at 0.55. Automated trading strategies and the well-known associated correlation between bitcoin and other risk assets may act as a self-fulfilling prediction of what is to come. The above soft correlation force may not be strong enough to lead to a structural shift in this trend,” Lunde said. He also pointed out that bitcoin and gold have been largely unrelated since May.

Where is bitcoin going?

Om Malviya, President, Tezos India, said, “Cryptocurrency and stock markets are generally correlated as factors influencing prices and investors/traders of both tend to follow similar trends. Globally, traditional investors are increasingly interested in crypto. Coming to stocks in comparison. The volatility of the latter. They want to see the crypto market grow steadily for some time like they usually have been doing in stocks before making any decision to start actively investing.”

“Bitcoin has always broken its previous highs, and we expect that to happen whenever market and inflationary conditions improve. It is time to move across different price ranges, according to an individual’s risk appetite. Keep accumulating bitcoins,” the Tezos chairman added.

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