Why is the rise in Bitcoin's correlation with the S&P 500 a bearish sign? Bitcoin's correlation with traditional markets has hit a multi-month high and this is a bearish signal, says analyst firm Santiment.

Why is the rise in the correlation of bitcoin with S&P 500 - bearish sign?

Bitcoin's correlation with traditional markets has hit a multi-month high and this is a bearish signal, says analyst firm Santiment.

Bitcoin's correlation with stock markets cyclically moves between positive and negative values, analysts say. The coronavirus pandemic has led to the correlation of bitcoin with the stock index S&P 500 is currently at a two-year high of about 0.6.



“Against the backdrop of the pandemic, we see very similar movements as the coronavirus forces investors to maintain an equal level of vigilance across all asset classes. Throughout history, achieving a high correlation with S&The P 500 was usually accompanied by a major decline in the cryptocurrency market, writes Santiment. - In other words, the first cryptocurrency in terms of capitalization performs better when its movements depend very little on traditional markets. ".

Analysts even argue that the number of sharp drops in Bitcoin in its recent history is the same as the number of cases where the correlation with the S index&The P 500 was growing. Accordingly, any further rise in the bitcoin rate, as a rule, is accompanied by its deviation from the S charts&P 500.

“We should see a clear sign of an approaching uptrend when this correlation line starts to go back to zero or below,” the authors add. At the same time, they notice that no strategy can be 100% correct over long periods of time and this is no exception..

Overall, Santiment expects bitcoin, not least due to its novelty and peer-to-peer economy, to recover faster than stock markets.

Bitcoin is trading near $ 5,900 this Monday, losing 13% after recent corrective rally.

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