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Crypto Bulls Frustrated as Bitcoin and Stocks Recouple – to the Downside
A continuing series of record highs for the S&P 500 and Nasdaq over the past weeks has done nothing to prop up sliding crypto prices, but Thursday saw both asset classes tumbling together.
Updated Jul 11, 2024, 4:48 p.m. Published Jul 11, 2024, 4:46 p.m.
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While bitcoin has struggled mightily over the past months, with its price falling more than 20% since hitting a record high in mid-March, U.S. stocks – as represented by the Nasdaq Composite and the S&P 500 – have seemingly been on a one-way path higher.
Both of those equity averages closed in the green for the seventh consecutive day on Wednesday, with both hitting all-time highs. For the S&P 500, it was its 37th record close of 2024 and for the Nasdaq, its 27th, according to MarketWatch.
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A report yesterday in The Block noted that bitcoin's correlations with those gauges had fallen to multi-month lows – to minus 0.84 with the Nasdaq and minus 0.82 with the S&P 500. (A reading of minus 1 would mean they're moving essentially the same amount but in opposite directions.)
Read more: Here's Why Bitcoin's Not Keeping Pace With Nasdaq
That's not the case today. They're all moving in lockstep. But unfortunately for the bulls, it's as stocks have turned sharply lower. At midday New York time, the Nasdaq is lower by 1.8% and the S&P 500 by 0.9%. Bitcoin, which earlier in the session climbed above $59,000 on welcome U.S. inflation news, is now lower by 0.6% to $57,500. The broader CoinDesk 20 Index is down 0.4%.
There could be further downside for cryptocurrencies if the equity market's bad day turns into a broader correction, Joel Kruger, market strategist at the LMAX Group, said in a morning update.
"Right now, the biggest risk we see to crypto assets is the risk that highly overbought U.S. equities could be on the verge of rolling over," Kruger said. "The correlation isn’t absolute by any means, but there is evidence that would suggest a sharp pullback in stocks could weigh on crypto, at least for a moment."
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Bitcoin could fall to $10,000 as U.S. recession risk builds, Mike McGlone says
McGlone links bitcoin’s downturn to record U.S. market cap-to-GDP levels, low equity volatility and rising gold prices, warning of potential contagion into stocks.
What to know:
- Bloomberg Intelligence strategist Mike McGlone warns that collapsing crypto prices and a potential bitcoin slide toward $10,000 could signal mounting financial stress and foreshadow a U.S. recession.
- McGlone argues the post-2008 "buy the dip" era may be ending as crypto weakens, stock market valuations sit near century highs relative to GDP, and equity volatility remains unusually low.
- Market analyst Jason Fernandes counters that a drop to $10,000 bitcoin would likely require a severe systemic shock and recession, calling such an outcome a low-probability tail risk compared with a milder reset or consolidation.
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