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Author Topic: Is Bitcoin in for another low?  (Read 143 times)
TheQuin
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May 03, 2018, 09:07:47 AM
 #21

I would say that they are only correlated in as far as they have both been in long-term bull trend since the 2008 financial crises. Although those bull trends are fuelled for very different reasons. If you look at shorter timescales you will find that turning points happen at different times because the markets are driven by very different fundamentals.

For instance, the turning point at the $20k peak in BTC came on 17/12/2017 (the day CME futures opened) fuelled by peak FOMO whereas the stock markets turned on 26/01/2018 on geopolitical tensions (Trump/Syria/Russia) and fears on a tariff trade war.

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May 03, 2018, 09:24:38 AM
 #22

I agree with the poster who says it is now looking like an over-priced asset.  If it doesn't go up in price what exactly is it's purpose. 
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May 03, 2018, 09:37:50 AM
 #23

I don't think saying that bitcoin will crash because of the stock market dipping is a fair conclusion to draw.

But anyhow, there is a possibility that we're heading for another low, though definitely not because of the stock market. Since we're still consolidating at the moment after the huge bull market of 2017, I think after this pump there may be a good amount of time where we go back to the bearish sentiment that dominated the first few months of the year.

That is if bitcoin is unable to break the $10k barrier, which isn't guaranteed 100%. If bitcoin does dip further, don't panic, but instead think of the accumulation opportunity that is available during the dips.

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May 03, 2018, 09:47:57 AM
 #24

I would say that they are only correlated in as far as they have both been in long-term bull trend since the 2008 financial crises. Although those bull trends are fuelled for very different reasons. If you look at shorter timescales you will find that turning points happen at different times because the markets are driven by very different fundamentals.

For instance, the turning point at the $20k peak in BTC came on 17/12/2017 (the day CME futures opened) fuelled by peak FOMO whereas the stock markets turned on 26/01/2018 on geopolitical tensions (Trump/Syria/Russia).

As I said, "the long term trends are pretty obviously correlated." But I think you're reaching a bit trying to attribute causation for stock market moves and suggesting on that basis alone there is no relationship. Pulling out one short term chart really doesn't tell the story. Those moves aren't necessarily relevant to money flow on 1-month or 1-year charts, and they don't speak to the idea of overall money flow into risky assets. Risky assets include overinflated stocks and cryptocurrency alike.

I don't think saying that bitcoin will crash because of the stock market dipping is a fair conclusion to draw.

That's not really what I'm saying. What I'm saying is that the context for a stock market crash is risk off, flight to safety, in a global sense. The relationship between stocks and BTC would be indirect.

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May 03, 2018, 10:01:11 AM
 #25

As I said, "the long term trends are pretty obviously correlated." But I think you're reaching a bit trying to attribute causation for stock market moves and suggesting on that basis alone there is no relationship. Pulling out one short term chart really doesn't tell the story. Those moves aren't necessarily relevant to money flow on 1-month or 1-year charts, and they don't speak to the idea of overall money flow into risky assets. Risky assets include overinflated stocks and cryptocurrency alike.

If I had enough time I could pull out lots of shorter timeframe charts showing that the turning points don't match and then digging through the news reports at the time to work out what caused them.

What I'm trying to say is the fact that two things are in a long-term bull trend doesn't make them correlated. The stock markets bottomed in March 2009 due to central banks quantitative easing. This provided a large amount of fiat that could be borrowed very cheaply. It depressed bond yields and other fixed interest product which resulted in large institutional investors being forced into riskier equity investments to find a return.

The banking crisis was equally the driver behind the creation of Bitcoin but its increasing value wasn't driven by pension funds looking for a better return than US Treasuries were giving. Equally the day to day fundamentals that affect the market's perception of the likely return in investing Amazon or Walmart has no bearing on the market's perception of the future value of Bitcoin. It lives in a very different ecosystem and just putting up two charts that go from bottom left to top right over a very long period of time doesn't prove a correlation.

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May 03, 2018, 10:49:17 AM
 #26

As I said, "the long term trends are pretty obviously correlated." But I think you're reaching a bit trying to attribute causation for stock market moves and suggesting on that basis alone there is no relationship. Pulling out one short term chart really doesn't tell the story. Those moves aren't necessarily relevant to money flow on 1-month or 1-year charts, and they don't speak to the idea of overall money flow into risky assets. Risky assets include overinflated stocks and cryptocurrency alike.

If I had enough time I could pull out lots of shorter timeframe charts showing that the turning points don't match and then digging through the news reports at the time to work out what caused them.

See the bolded statement above. If two markets don't react to one another to the day, it doesn't follow that they are broadly uncorrelated. Furthermore, it's pretty silly to try to attribute every move to news. That's just not how markets work. There's nothing funnier than watching news media trying to explain price action.

What I'm trying to say is the fact that two things are in a long-term bull trend doesn't make them correlated.

Sure it does. Correlation just measures how close two things are to having a linear relationship. Divergence over time would break the correlation, but that hasn't happened. We're not talking about causation. What I'm suggesting is they both might react to macroeconomic conditions and catalysts (resulting in positive correlation but not causation).

Markets are very complex, interconnected organisms. I'm talking about money flow on a macro, global level. You're talking about news and matching charts up with short term candles. What I'm talking about is a lot more abstract than that.

The banking crisis was equally the driver behind the creation of Bitcoin but its increasing value wasn't driven by pension funds looking for a better return than US Treasuries were giving. Equally the day to day fundamentals that affect the market's perception of the likely return in investing Amazon or Walmart has no bearing on the market's perception of the future value of Bitcoin. It lives in a very different ecosystem and just putting up two charts that go from bottom left to top right over a very long period of time doesn't prove a correlation.

In a technical sense, I'm fairly sure it does. It's also more than just the long term trend; there are lots of shared consolidation periods. Anyway, a correlation isn't about causality. I'm not saying "the market's perception of the likely return in investing Amazon or Walmart affects the market's perception of the future value of Bitcoin." That's completely absurd.

What I'm saying is stocks don't necessarily exist in a vacuum. If Bitcoin has a different ecosystem, that doesn't mean it isn't approached as a speculative investment, much the same as tech stocks. That's why in a global crash scenario, I'm skeptical of the idea that Bitcoin will prosper. Economic crashes generally mean a flight out of risky assets. That's what I'm talking about. From that view, you might expect Bitcoin and stocks to have some level of positive correlation in either an exuberant market (like recent years) or a crashing market.

TheQuin
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May 03, 2018, 11:00:27 AM
 #27

@exstasie

We just have a different opinion of what correlated markets are. I've been involved in day trading for a very long time and we talk about correlated markets in terms of things that move in sync most of the time and have short periods where that correlation can be broken. (Or have an inverse correlation.). We sometimes even use this to take a signal to enter a trade on one market based on another slightly leading on a particular day. I don't see any possibility to do that using stocks and Bitcoin. If you view it in terms of an overall trend then we're just talking at crossed purposes.

I agree about the news but that doesn't undermine that fundamentals drive markets. I see completely different fundamentals driving these two markets, but that just an opinion.

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