It seems to be a good time for the international financial markets. Well, after one of its worst falls when the Coronavirus hit the west in mid-March, the stock market has been rapidly recovering in value. However, this growth may not be as sustainable as might be thought. Reason why some analysts warn about a possible bubble on Wall Street, which could affect the Bitcoin market.
The correlation between Wall Street and Bitcoin
This is without a doubt one of the most controversial topics within the crypto market today. Well, for many there is no doubt that there is no correlation between Bitcoin and the stock market on Wall Street. On the contrary, many analysts argue that BTC is an asset value reserve. That is, the price of the cryptocurrency has no direct relationship with global financial markets, its price remaining firm even in the face of a drop in them.
However, and especially during the Coronavirus crisis, there are more and more voices noting the correlation between the price of Bitcoin and the performance of Wall Street. A relationship that, according to analysts such as the tweeter known as PlanB, would have existed for several years, and would be the most outstanding fact to understand the cryptocurrency market.
If this were true, the fall and subsequent recovery in the price of Bitcoin after the arrival of the Coronavirus in the western world would have been a direct consequence of the same phenomena that led to the collapse and boom of the financial market in that same period of time. Therefore, the risk of a Nasdaq bubble would be dangerous for Bitcoin.
The bubble in the market
And this is precisely the theory that several financial market analysts like Ned Davis are promoting. Who has already warned that a bubble is forming on Wall Street, especially pointing to the actions of technology companies as the most risky right now:
“The valuations of technology companies are the most extreme that have been seen since the technology bubble of 2000, based on the relationship between Nasdaq and small-cap stocks (…) The Nasdaq 100 seems to me bubbly. If this is not a sign that you are speculating, I don’t know what is“
This coincides with other voices that have been warning for months that the injection of money by the Federal Reserve has gone directly to Wall Street. Where they have caused the stock price to rise, even as the real economy creaks under the effects of the Coronavirus.
For this reason, those who postulate that there is a strong correlation between Wall Street and the price of Bitcoin are right. When the bubble in the stock market bursts, the price of BTC will also drop dramatically. A possibility that becomes our Today’s Data here at CryptoTrend.