- Bitcoin surged past $20,000 yesterday, but then erased its gains
- Price action was likely influenced by the S&P 500 breaking its summer lows
- Bitcoin and other crypto assets have traded in close correlation with stocks
Bitcoin surged by more than 5% yesterday, but it’s now trading in the red. Its price action is likely correlated with the S&P 500 trading at its lowest level since November 2020.
S&P 500 Drags Bitcoin Down
Bitcoin rallied yesterday, but it erased its gains as stocks retraced.
The top crypto showed signs of life yesterday after breaking past $20,000, but it’s since retraced the totality of its gains. According to CoinGecko data, Bitcoin is trading at $19,014, down 0.2% yesterday. Bitcoin’s initial bounce met resistance in the $20,350 area, which has served as an important level since it tumbled down from $25,000 in mid-August.
Bitcoin’s rise and fall can likely be explained by the recent selloffs in stocks (the crypto market has shown a high correlation to traditional markets throughout this year). The S&P 500 hit 3,631 after a 0.71% retrace yesterday, its lowest level since November 2020. The Nasdaq Composite has yet to follow suit, trading about 200 points above its summer lows. The Dow Jones, meanwhile, has been making new lows throughout this month.
2022 has been one of the worst years in U.S. stock market history, thanks mainly to the Federal Reserve’s commitment to aggressively raising interest rates to curb inflation. The S&P 500 is down 24.3%, the Nasdaq 32.88%, and the Dow Jones 20.79% since hitting all-time highs in January. The U.S. central bank announced a third consecutive 75 basis point interest rate hike earlier this month, and Fed Chair Jerome Powell has repeatedly indicated that it plans to hold its hawkish stance until inflation drops to 2%.
The crypto market’s reaction to Bitcoin’s moves has been muted so far. ETH has shown marginal resiliency; it’s currently trading, up 0.2%. Ethereum has lagged behind Bitcoin since the network completed “the Merge” to Proof-of-Stake on September 15, a highly anticipated upgrade that turned out to be a “sell the news” event. Per TradingView data, the ETH/BTC has slid down to 0.069 after hitting a 2022 high just ahead of the Merge. ETH/BTC has been trading in a range from 0.05 and 0.085 since May 2021.