Maybe it's no coincidence that stock market prices surge upward the same time Bitcoin flexes its pricing muscles.
Or is that a misleading conclusion?
Here's the deal. A recent report from Nautilus Investment Research states that Bitcoin and the stock market actually feed off one another, pushing prices forward on both sides again and again.
In an August 7 Twitter blast, Nautilus stated that "Bitcoin and SPX (the S&P 500 index) are trading together year to date, and that "Bitcoin rate of change acceleration drives SPX returns." Nautilus specifically notes that every time Bitcoin prices appreciate by 30%-or-more in a month, stocks rocket skyward, as well, after a few months.
(Here's the chart Nautilus cites as proof that Bitcoin and the stock market are correlated. The company's report used 18 variables and tracked data back to 2010, when Bitcoin was in its infancy.)
While the Nautilus reports there is a correlation, it doesn't exactly state why that correlation exists. One theory is that, with Bitcoin's market cap at $55 billion and the fact that it's trading at $3,380, the sheer amount of money on the table may have an impact on stocks that are linked to Bitcoin, thus driving up prices.
But most Wall Street professionals aren't buying that argument.
"Starting with the most obvious, the size disparity between U.S. stocks and Cryptocurrency markets is massive," says Zach Hamilton, managing partner of General Crypto. "Stocks traded on the New York Stock Exchange alone are worth more than $120 trillion in U.S. dollars, while the total global value of all cryptocurrencies in existence is just over $120 billion."
Hamilton, who cites data from ARK that show there is actually a "weak correlation" between the S&P 500 and Bitcoin pricing, says Bitcoin is booming, but the stock market has nothing to do with that growth - and vice-versa.
"When you look at the size of the boom, as well as the concentration of gains from this boom, you can see that it is nowhere near a meaningful level of movement to affect the general stock market," he says. The stats around this are staggering, and thanks to the blockchain they are all public."
That seems to be the ongoing sentiment among financial professionals, some who say the investment models are just different between Bitcoin and the stock market.
"From my own experience the stock market and Bitcoin aren't that linked," states Frederick Coleman, manager of media and communications at Blockonomics, a start-up that focuses on making it easy for e-merchants to accept Bitcoin. "Take the last couple of days, Bitcoin has been surging in price while the stock market hasn't."
Bitcoin and the stock market are affected by different factors, Coleman explains.
"Bitcoin is influenced by technical factors, countries changing rules surrounding Bitcoin, media coverage, and other things of that nature, and those things don't influence the stock market," he says.
Similarly, the stock market doesn't influence Bitcoin, he adds. "I think this is largely, because those who invest in Bitcoin are often strong libertarian or anti-big corporation, and like Bitcoin's decentralized nature," Coleman says. "These people aren't going to invest in the stock market."
There is, of course, one area where both Bitcoin and the stock market are in harmony. "There's a link that both the market and Bitcoin depend on the economy," Coleman says. "If the world economy is strong, both are more likely to be invested in because people have more money."
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