Traders on the floor of the New York Stock Exchange.
Does the last week prove that it’s still OK for investors to ignore bitcoin without penalty?
The incumbent cryptocurrency collapsed by a third within a day, rallied 40% from the early-Wednesday low and then gave back 10% Friday. The drama involved a sweep of margin calls, purging leveraged holders, and at the worst of it, bitcoin had lost more than half its peak value, shedding some $600 billion in value.
All in a week when the S&P 500 ended up lower by less than half a percent, leaving it a mere 2% beneath a record high after sliding sideways for the past five weeks. More snooze than swoon.
It’s a bit glib to say this demonstrates that crypto volatility and flows are irrelevant to equities. The adjacent stocks – ones associated with crypto assets or owned by many of the same investors – very much felt the aftershocks. And, for sure, bitcoin behaves as a risk asset and has traveled at least directionally with stocks rather than against them.
BCA Research strategist Anastasios Avgeriou says of the crypto vibrations: “Some of these apparent liquidation pressures have spilled over to the S&P 500 and, given the recent tight positive correlation between Bitcoin and the SPX, warn that some caution is still warranted in the equity space, at least in the near-term.”