Cryptocurrency

Published on January 31st, 2022 | by Bibhuranjan

0

The Correlation between the Crypto and the Stock Markets

Is there a correlation between the cryptocurrency market and the stock market? Also, what’s the more recommendable investment option between cryptocurrencies and stocks? Well, allow me to address the second question before focusing on the first, which is the main agenda of this blog post.

You see, a lot of people will tell you cryptocurrencies and cite many reasons when you ask them the second question. Let me say that I concur with them to a full extent. If you find those reasons convincing too, go ahead and put your money into digital currencies. After all, it’s better to try and fail than to never try at all. If you are in the United Kingdom, make sure you work strictly with bitcoin trading platform uk. If you are in any other part of the world, find a reliable cryptocurrency trading platform that is relevant to your jurisdiction. eToro is another option to consider as per this Wikitoro trading guide. It’s the first step that will put you on the right path towards success. I

Now let’s go back to the main question, which is; Is there a correlation between the cryptocurrency market and the stock market?

Image by Freepik

While both are considered separate markets, the crypto market and the stock market, without a doubt, have a strong correlation. As such, anything that happens in one market has an impact on the other market. Here’s proof of that: on Wednesday(26/01/2022), the United States Federal Reserve announced that it was going to increase the interest rate on stocks and lower liquidity. This was after the financial regulator had previously lowered interest rates due to the Covid-19 pandemic in a bid to protect investors. Consequently, the anticipation of higher rates suppressed the enthusiasm of investors, causing the stock market to take a nosedive just a few hours after the announcement. The changes in the stock market had an impact on the crypto market as evidenced by Bitcoin(the most popular cryptocurrency), whose value weakened and dropped to $37,775 the same day the stock market plunged.

What’s the Link Between the Cryptocurrency and Stock Markets?

The reason why changes in one market have a direct impact on the other market in the crypto and stock markets is the existence of a common link between the two markets. The link is none other than investors.

A good number of investors found in the crypto market also hold assets and equity in the stock market. Examples include Elon Musk (the richest person in the world), Jeff Bezos(the second richest person in the world), Mark Zuckerberg( Facebook co-founder), and George Soros. These individuals hold assets both in the stock and cryptocurrency market. As such, it’s possible that they carry the decisions they make in one market to another and vice versa.

Why It’s a Good Idea to Invest In Cryptocurrency In the Aftermath of the Federal Reserve’s Announcement

Now is the right time to buy Bitcoin at a throwaway price as many investors are selling off their currencies, following a scare from the Federal Reserve’s announcement about an upcoming interest rates hike. The fact that many people are disposing of their Bitcoins may soon create a situation whereby only a few people hold the digital currency. With a reduced number of investors, there’s going to be a drop in the number of people who are selling the coin. Consequently, the coin is going to become less readily available for new buyers, something that’s going to see its value appreciate.

Final Thoughts

For a long time, I’ve wondered whether there is a correlation between cryptocurrency and stock markets. You find that when the stock market appreciates, the cryptocurrency market does the same. When it plunges, the latter follows suit. Now it’s clear to everyone that the two markets indeed correlate, thanks to the recent events that happened in both markets, following the announcement by the Federal Reserve that it was going to hike interest rates on stocks as from March this year. I went out of my way to find out the link between the two markets, which is none other than investors. The same investors that trade in the stock market are the same individuals that do business in the cryptocurrency market. So, they carry their decisions from one market to another hence the same patterns in the two separate markets.


Cover Image by Freepik

Like this post? Share with your friends.
Share on Facebook
Facebook
0Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Share on Reddit
Reddit
0Share on Tumblr
Tumblr
0Share on VK
VK
Email this to someone
email

Tags: , , ,


About the Author

Avatar photo

Editorial Officer, technofaq.org I'm an avid tech enthusiast at heart. I like to mug up on new and exciting developments on science and tech and have a deep love for PC gaming. Other hobbies include writing blog posts, music and DIY projects.



Leave a Reply

Your email address will not be published.

Back to Top ↑