The recent falls in the crypto space has left many traders reeling. Bitcoin prices have collapsed around a wider market sell off as high inflation has prompted central banks to enter step hiking cycles. This in turn has led to worries over slowing growth that can potentially lead to a global recession. Industrial and base metals collapsed even as energy prices remain high. So, what are some tips for managing Bitcoin’s price?Well, it appears at this stage to be really quite straightforward.
Bitcoin tracks stock prices
Take a look at the chart below which overlays Bitcoin prices and the Nasdaq. You will notice that BTC price and Nasdaq prices are moving in tandem
Why is this correlation so tight? The best explanation is likely to be that BTC is now grouped with tech stock for risk management. So, when risk dictates sell tech, then BTC gets sold too. Remember that many BTC investors are large whales holding many, many coins.
So, what’s the trade?
Well, this means that BTC should recover alongside stocks. When will stocks recover? That will most likely be the moment that the Federal Reserve indicates that it will be pausing/stopping its rate hiking cycle. So, if you are wondering what the next path for BTC will be then watching the Nasdaq may prove to be a reliable guide as long as this close correlation remains and there is no obvious reason why that relationship should break down. See here for another article I wrote back in December 2021 with the close correlation then between the VIX and BTC.
Did you know that you join a daily community that discusses key market opportunities each day at 11.30 UK time? See here for more details. Joining a community of traders where you can freely ask questions is one of the most helpful ways of learning the craft of trading.