Brace For Impact! How Would Another Stock Market Crash Affect Bitcoin?

Source: Adobe / Avantgarde

Big names in the financial sector are alarming that stocks are vastly overvalued – more than ever. Would the traditional market crash again, how would this affect bitcoin (BTC)? Analysts think BTC would feel the impact, but this time there is a chance it will be different.

Legendary investors Stan Druckenmiller and David Tepper were the last to weigh after a historic market recovery, saying the risk reward of holding shares is the worst they’ve come across in years, Bloomberg reported adding today that there is no way of rapid economic recovery once the ongoing pandemic subsides, nor will the $ 3 trillion stimulus from the Federal Reserve (Fed) enough to offset the massive blow to the economy and markets. The latest BTC star, another prominent hedge fund manager Paul Tudor Jones, also expressed doubts about markets. He also recently confirmed that his fund has already invested hundreds of millions of USD in bitcoin.

Meanwhile, Social capital CEO and Virgin Galactic President, Chamath Palihapitiya, told CNBC says the economy is “completely separate” from the stock and bond markets, and that “the Fed has been the main cause of that embezzlement.”

The S&P 500 Index is down nearly 5% this week, as investors and economists forecast further declines.

Meanwhile, data shows that BTC is again trying to disconnect from the stock market.

BTC and S&P 500 correlation table

Get ready for impact! How would another stock market crash affect Bitcoin? 102
Source: Coin Metrics

“We see a short-term disconnection taking place, but time will tell if it persists,” said Tom Lombardi, director of Wave Financial Group, a Los Angeles and London-based digital asset management company, adds that “the current bitcoin outperformance to equities is likely to be a search for high risk, not a safe haven or investment in hard assets.”

According to him, we are still in the early days of bitcoin, so the “safe haven of value” thesis is just that – a thesis: “Institutional / mature investors don’t see it that way.”

Lombardi noted that if the potential new sell-off is limited to stocks only, there have been many times in history that bitcoin has remained disconnected from the stock market.

Significant steps and first signs

“It’s hard to say what could happen to BTC if the stocks saw another dip,” said Mati Greenspan, founder of Quantum Economics, said Cryptonews.com. The last dip showed us what can happen in the market in panic.

“However, BTC has made significant progress in recent weeks,” said Greenspan, “and if investors believe it is a valid hedge against any forces that lower the market, it may remain much more resilient next time.”

Bitcoin analyst Simon Dingle agrees that a flight to cash would once again affect BTC, but says this time will be different as we see the first signs of a hype cycle returning to bitcoin and crypto, which is partly caused by halving Bitcoin.

In addition, according to Dingle, BTC has recently been compared to gold and other safe-haven assets, while at the same time more people are realizing that BTC is measurably scarce and easily transferable in a way that physical assets like gold are not.

“As the understanding of BTC grows, so does the attraction as the best possible value store in uncertain times. The only thing missing now is the following realization that it is also an unbeatable settlement tool, ‘said the analyst Cryptonews.com

TD Ameritrade Head of Research estimates that the Federal Reserve’s total balance will rise from $ 7 trillion to $ 12 trillion by the end of 2021. Any hedge fund manager with capital and / or a public voice would skip this story with investments in forex, gold and bitcoin, ‘added Lombardi.

However, speculating on short-term price movements is a waste of time, according to Bitcoin entrepreneur Matt Odell: “The reality is that no one really knows what will happen. In the long run, the fundamentals of bitcoin seem stronger than ever.”

At pixel time (16:01 UTC), BTC is trading at $ 9,645 and is up 5.5% in a day and 2% in a week. The price increased by 39% in a month and 20.5% in a year.
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