For the market leader, things are going downhill on Tuesday, although the S&P 500 has a good start to the day. Are these the first signs of an encapsulation? We take a look at the current market situation.
Downtrend after rebound
At the time of this article, the No.1 crypto currency is at a rate of 10788 USD, which is a daily minus of 1.42%. The bulls must therefore record another setback at the important 11000 USD mark and leave the support area at 10800 USD. The starting position could hardly be better. The S&P 500 moved 3440 points north the previous day and today it looks like the price will recover (+0.16%). At the same time, the price of gold is shooting up by 0.45%.
Correlation to the traditional markets
Over the past few weeks, we have repeatedly observed a high correlation with the major stock indices. When the rising number of new coronavirus infections caused an enormous downtrend on Wall Street on September 21, 2020, it did not take long for the Bitcoin to crash. While the leading crypto currency slid almost unchecked to the magical USD 10,000 mark, the Altcoins experienced a veritable “bloodbath” with double-digit percentage losses.
Experience an encapsulation
The correlation to traditional markets is a double-edged sword. On the one hand, a stable S&P 500 ensures security in the crypto space, while on the other hand the BTC registers negative news very sensitively. When the first “coronavirus wave” brought the economy to its knees in March, the volatile Bitcoin plummeted at a rapid pace below the USD 5000 mark. After the Halving Event, the signs were pointing to independence again after a long time, but this did not last long. It therefore remains questionable whether today’s price development is really a long-term encapsulation.
Why is an encapsulation important?
Bitcoin fulfills several characteristics that define an independent “Store of Value”. The leading crypto currency is limited and can and the inflation rate is below 2%. In addition, the “digital gold” can be transferred apparently barrier-free. However, experts repeatedly point out that the crypto space with a market cap of approx. 346 billion USD is only a marginal market compared to the large markets. The situation is different with gold. The coveted precious metal has a long history and the market capitalization is over 8 trillion USD.
Altcoins follow Bitcoin
A Bitcoin Dominance Index of 57.6% illustrates the dependence of the alternative assets. With a few exceptions, the Altcoin is going down on Tuesday. Binance Coin (+ 5.6 %) and OMG (+ 7.51 %) are defying the downward trend for the time being.