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Home Price Analysis Bitcoin's Relationship With Dollar Index And U.S. Stock Market

Bitcoin’s Relationship With Dollar Index And U.S. Stock Market

The inception of Bitcoin in 2009 triggered the new crypto market that does not sleep at all. Crypto-currency market is 24*7 unlike other markets that shut downs in weekend. More over, this market can not be shut down by anyone if we look into decentralized exchanges.

Today after more than 10 years of crypto market maturity, Bitcoin has seen 12,173,746% growth. That means if you had invested 100 dollar in 2010-2011, you would have been a millionaire without any doubt. It’s that good and that big.

In this period of 10 years, crypto market has also seen many volcanic ups and downs. People have studied it to understand the technical aspect of Bitcoin’s price action. Many studied, many predicted and many wondered. If we look into recent price action of Bitcoin, it may not look prettier to new comers as Bitcoin is still 50% down its all time high price. But if we look at “why bitcoin was created and what for” part, it’s doing awesome job of becoming more than 200 billion dollar market cap.

Bitcoin Price & Dollar Index

If we look into the price action of Bitcoin, it shows inverse correlation to Dollar Index. Why? Is this inverse relation good? The answer is “YES!”. Bitcoin’s narrative is to provide financial freedom to people. Traditionally, dollar is considered safe haven by investors in the times of market crash and almost every countries’ currencies are measured with dollar strength. But Dollar is controlled by banks and government and printed out of thin air. Bitcoin is solving this problem by becoming trust-less digital money. Bitcoin is in this sense – a digital gold. Hence it makes perfect sense to have inverse correlation with Dollar Index.

If Dollar Index increases, that means people think Dollar is safer -> hence money stays in dollar and bitcoin price decreases.

If Dollar Index decreases, that means people think Dollar is not safe -> hence people will go after bitcoin or gold.

Bitcoin Price & U.S. Stock Market

Recently, there is undeniable correlation between Bitcoin’s price and U.S. stock market (s&p 500). If US stock goes up, Bitcoin’s price also goes up. This correlation has grown more stronger after March market crash (because of Coronavirus).

Before the market crash in March, Bitcoin’s correlation was more with gold. But now it seems Bitcoin is correlated with both US stock market and gold. This further tells us that we can not hedge Bitcoin against stock market crash in short term even though in longer term, Bitcoin may have a greater story to tell with it’s price action and as a hedge against manipulated fiat currencies.

Note: Keep learning about Bitcoin. The information in above article is not an investment advice

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Krishna
Krishna is an initial CDT member of RECAP blockchain network; a crypto enthusiast who has worked on multiple startups since 2013.
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