Crypto Markets Go Green One Week After “Black Thursday” Sell-Off
On March 12th, Wall Street and the cryptoeconomy experienced a “Black Thursday” of epic proportions, as the top U.S. stock indexes plunged intraday and the top cryptocurrencies bitcoin (BTC) and ether (ETH) both lost 50% respectively in the same span.
Just one week later, and things looked quite differently.
Indeed, while BTC and ETH have generally tracked the performance of U.S. stocks in recent days, it was the cryptoeconomy that popped up first in the early hours of Thursday, March 19th, after which Wall Street indirectly followed suit with acutely bullish trading. Can it last?
Top Cryptos See Double-Digit Percentage Gains
On March 19th, both bitcoin and ether traded up by more than 15% on the day, with BTC hitting past $6,300 and ETH past $140 at one point. That’s on the heels of these cryptocurrencies trading well below these marks, under $5,000 and $100 respectively, just one week prior.
The temporary surge of buy pressure swept across other top crypto markets, too. At the time of writing, XRP was up to $0.165 intraday (+12%), Bitcoin Cash up to $224 (+23%), Binance’s BNB up to $12 (+16.5%), Tezos to $1.69 (+21%), and Chainlink to $2.27 (+18%).
It’s not clear precisely what led to the short-term rally, although there were some consolidating narratives that may have been driving factors.
For instance, the Trump administration has continued to accelerate plans for various economic stimulus plans amid the current pandemic-driven global economic downturn, which may have temporarily soothed crypto markets, markets which have generally been tracking U.S. stocks lately.
What Are We Dealing With?
March 19th was a green day both for Wall Street’s top indexes and the cryptoeconomy’s top assets. The move up comes amid a period of unprecedented correlation among the price performances between BTC and ETH and the S&P 500, a major U.S. stock index that tracks America’s top companies.
For example, on March 17th BTC and ETH hit new all-time highs with regard to correlation with the S&P, as the correlation coefficients between BTC-SPY and ETH-SPY hit 0.59 and 0.61 respectively.
Correlation values are determined between -1 and +1, so the aforementioned measurements suggest that the top two cryptocurrencies have sharply approached significant correlation with a top U.S. stock market index this month.
These metrics were unprecedented and marked new records, as beyond this week, the previous records for BTC-SPY and ETH-SPY correlation had been around 0.31 in December 2018. That means the spike of correlation in March 2020 has been nearly double what was ever seen before.
A Good Time for Crypto?
The crypto markets went up sharper on March 19th than the U.S. equity markets did. But why?
It’s hard to say, but some cryptocurrency proponents are having a field day at the moment as a result of various governments resulting to inflationary emergency measures to combat volatility in mainstream markets.
Of course, the deflationary vs. inflationary arguments are a long-standing economic debate in the crypto space, but never more have the deflationists had a better time to shine then now, when governments across the world — including in the U.S. and in the E.U. — are resorting to emergency money maneuvers that will likely lead to large amounts of fiat money printing.
Maybe crypto is an interesting hedge for now then, and maybe it’s now. In various respects, the global economy seems primed for a deep recession, so it wouldn’t be surprising for the main cryptocurrencies to dive in the interim and still have considerably interesting prospects later.
That’s moreso to say that most assets, particularly risk-on ones, are going to sell-off during a global panic. But assets like BTC and ETH have unique selling points that, even amid an international financial crisis, sets them starkly apart from mainstream tradable assets. We’ll see what happens from here.
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OhNoCryptocurrency via https://www.ohnocrypto.com/ @William M. Peaster, @Khareem Sudlow