UNITED STATES-. Stocks were jolted Friday following news President Donald Trump tested positive for coronavirus. But in a move counter to the often-touted narrative that the dominant cryptocurrency acts as a haven, Bitcoin also retreated. That’s because the correlation between Bitcoin and the benchmark S&P 500 stock index remains positive, meaning that its price movements are consistent with those in equity markets.
In addition, Bitcoin’s 14-day Relative Strength Index (RSI) reading clocks in at 45, while the equity index’s is at 51. That suggests the cryptocurrency’s decline has been more severe than the overall stock market drop. The S&P 500 has lost 6% since its September high, while Bitcoin’s down about 15% since its mid-August peak, as Bloomberg reports.
“We need more clarity on the election cycle and additional stimulus to help get things moving again in equities — and also in Bitcoin,” said Meltem Demirors, chief strategy officer of CoinShares. “Bitcoin has stayed range-bound despite a slew of positive news, largely because there is not enough inflation due to weak aggregate demand. We need Bitcoin’s behavior to match its narrative before we see a breakout.”
U.S. stocks fell on Friday as investors weighed the implications of Trump’s positive test for the coronavirus. Traders had already been bracing for turmoil ahead of the November elections. The CBOE Volatility Index, known as Wall Street’s fear gauge, jumped the most in a month.
Bitcoin fell for the fourth straight day. It declined as much as 2.1% on Friday to around $10,387 after U.S. equity markets opened for regular trading. Peer coins including Bitcoin Cash, Dash, Litecoin and Monero also retreated. Though Bitcoin has rebounded since its springtime slump and has gained about 50% this year, it’s hovered in a tight range for almost a month. The coin is coming off a rough September, in which it lost 8.3%. That was its worst month since markets crashed in March at the start of the pandemic.
Demirors expects Bitcoin to stay range-bound in the near-term. Signs of a change could first be reflected in the options market, she said. According to Mike McGlone, an analyst with Bloomberg Intelligence, Bitcoin could benefit in an environment where additional upsides for equities and bonds are limited.
The coin is “growing up fast” and many of its adoption indicators are positive, he wrote in a note. “Bitcoin is unique due to its limited supply, which unlike most assets isn’t influenced by prices, tilting the bias toward appreciation,” McGlone said. In addition, it “appears as the leader in the early days of a paradigm shift toward digital money and stores of value. It may fail, but we see that as unlikely.”