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Bitcoin - DJIA correlation and the Corona virus

By Pyratellama | THe_LoOny_LLamA | 9 Mar 2020


In this article I'm going to show you the correlation of BTC and the DJIA from they year until now, and how it broke today.

 

Since the beginning of this year the DJIA and BTC have been pretty similar. It started being even more similar around February 10. You can see the correlation with the following two pictures. Notice how they move in the same direction at the same time.351665157-45a9ebed307b086b293279b9a6e1f165043ec6076b7b11f7e749c8b3b64b11fb.png351665157-c4569b7acb14b8842d4d29a1bd6ed123ab63993e7ac23c447f6886d20ad52fa3.png

You can see that the Dow was consistently higher until the beginning of the drop around February 24. Even before that you can see correlation with all the hills and valleys since the beginning of the year. Since then it has become more correlated. This is pretty interesting. To me it says that there are more traditional investors getting into the crypto space. You can also draw some inferences with overseas markets.

Around February 24 the Corona virus hit mainstream media in the US. Fears of the virus spreading and slowing production hit the markets hard causing a plunge in the Dow. At the same time you can see Bitcoin had a drop as well. The thought behind the virus hurting the economy is pretty obvious, people will go out less and spend less. The other point is that manufacturing is slowing and sometimes even stopping in China. For example there's a shortage of iPhones and Apple says they may not be in stock for 2-4 weeks. That will hurt apples quarterly report thus effecting their stock. Wether the amount the Dow dropped is proportional to how much the disruption the virus will cause is up to you to decide. There are some major problems with the Fed printing money every night, but that's a post for another day. 

Should Bitcoin be following the Dow? Probably not. It's not based off of anything that the Dow is except that they may have a crossover of investors. The production of Bitcoin is not going to slow, the trading will probably not be effected by it. And don't forget we have the reward halving coming up. Part of it makes sense, part of it doesn't. I don't personally believe these markets should be as correlated as they appear to be. Which brings us to our next point.

Today Bitcoin broke from the Dow. Below you can see graphs for the day of both markets. At the beginning of the day you can see that the Dow plunged. It plunged due to markets overseas and futures crashing over the weekend. However today Bitcoin did much better than the Dow.

351665157-9144fa3475c9eeb36b5f49ee21d9293a51c6054af0040fbb1832db1576dddc08.png351665157-f6c288307c6d81990fd6701b484a239898e65820bfc1bb40c858f645febfb565.png

You can see in these charts the stark differences. Bitcoin came out about even, while the Dow lost 8% points. As the Corona virus continues to wreak havoc on the markets Bitcoin should continue on a positive trend. The virus should be done in a few months at which time the stock market should have a healthy rebound.

Is this a splitting of the two markets? Will this trend continue? Will bitcoin far outperform the Dow again? I believe so, but what do you think? Please let me know in the comments.

Thanks for reading!

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Pyratellama
Pyratellama

Audio engineer, studio owner


THe_LoOny_LLamA
THe_LoOny_LLamA

All kinds of stuff ranging from crypto, to music, to life hacks

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