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Bitcoin’s high correlation with S&P 500 suggests further price dips are coming


The S&P 500 index registered its largest intraday losses since June 2020 earlier this week.

  • Bitcoin's total market capitalisation stands at AUD$820 billion (US$576 billion).
  • BTC's current market movements are mirroring those shown by the S&P 500 during the 2008 financial crisis.
  • Members of inter-governmental political forum G7 are calling for stricter crypto regulations following the recent Terra (LUNA) debacle.

Bitcoin has continued to trade around AUD$42.5K (US$30K) for nearly 10 days running. The digital asset is down 27% over the last month while trading at AUD$43,081.

BTC's recent decline comes in lockstep with the continued poor performance of the United States equities sector. The S&P 500 saw its biggest intraday decline on 19 May in nearly 2 years. This could be due to Tesla's removal from the S&P 500's ESG Index, a move that saw CEO Elon Musk release the following tweet shortly after:

"Exxon is rated top 10 best in world for environment, social & governance (ESG) by the S&P 500, while Tesla didn't make the list! ESG is a scam. It has been weaponised by phony social justice warriors."

Musk's opinion was echoed by Ark Invest CEO Cathie Wood, who called the S&P 500's decision to keep Tesla off its ESG list as "ridiculous" and not "worthy of any other response".

How to buy Bitcoin

Crypto and traditional finance correlation remains high

With inflation numbers rising across the globe, experts believe "risk assets" will continue to consolidate over the coming few months. Data shows Bitcoin is aping the trends exhibited by the S&P 500 during the 2008 real estate bubble crash. Independent analyst Dylan LeClair, believes we are currently witnessing the global "everything bubble collapsing in real time". Financial pundit Holger Zschaepitz recently referred to the current economic landscape as the "biggest bond bubble in 800 years".

Bitcoin could potentially move past its current US$30K level before correcting again in the near term. Analyst Michaël van de Poppe believes that if BTC is able to hold ground around US$29.3K then a move to US$32.8K–$34K could be in play. Lastly, some experts see last week's drop to US$23,800 as not being BTC's bottom and that a larger capitulation could be incoming.

Terra crash sees G7 call for stricter crypto regulations

Officials associated with the Group of Seven (G7) — a forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, along with the European Union — have urged the Financial Stability Board (FSB) to ramp up its crypto regulation efforts. During their meeting earlier this week, members of the international body noted:

"In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB to advance the swift development and implementation of consistent and comprehensive regulation."

The "turmoil" in question being the recent wipeout of Terra and its associated cryptocurrencies, namely LUNA and TerraUSD (UST). The collapse even had United States Treasury Secretary Janet Yellen calling for federal agencies to foster a "consistent federal framework" around stablecoins once again.

Interested in cryptocurrency? Learn more about the basics with our beginner's guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

Disclosure: The author owns a range of cryptocurrencies at the time of writing

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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