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US, Korea, China Stock Markets Plummet: is Crypto Correlated?


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The crypto market is continuing to lose its value as the U.S., South Korea, and China demonstrate record high losses in their respective stock markets.

As an alternative store of value, cryptocurrencies are considered as viable long-term investments, especially by millennials, in a period of global financial market instability and volatility. However, recent weeks have shown that cryptocurrencies are still vulnerable to the weakening global economy and the asset class is not able to perform as a hedge against uncertainties in the market.

Global Markets Crash

A lack of correlation is not equivalent to an inverse correlation. Merely because an asset is not affected by a certain catalyst, which in the case of crypto could be the instability of the global market, it does not mean that the asset increases in value as a result.

Historically, the crypto market has demonstrated a lack of correlation with the global stock market and traditional markets like equities. It has consistently recorded independent price movements regardless of how the financial market performs.

Over the past several weeks, as investors began to head towards the exit of stock markets fearing a further drop in U.S. stocks, the price of major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) plunged by more than 35 percent.

The U.S. stock market is experiencing one of its worst sell-offs in history and the trade war between the U.S. and China has led to a decline in the valuation of the Chinese stock market. Overnight, Shenzhen Composite fell 3.3 percent and Shanghai Composite dropped 2.5 percent.

The weakening U.S. and Chinese markets directly affected the economy of South Korea, which was already in decline due to the country’s struggling growth rate. The Kospi fell by 1.2 percent in the past two days and investors generally expect the instability of U.S. and Chinese markets to be sustained.

Alvin Cheung, associate director for Prudential Brokerage, told SCMP:

“There is a lot of negative news about the US criticising China before Trump and Xi meet next week, and that has dented sentiment. The mixed messages could be the US trying to win some bargaining chips for the upcoming meeting. Investors are on the sidelines, closely watching to see if the meeting will yield any concrete results.”

The trend of the global market is gearing towards the elimination of high-risk stocks, equities, bonds, and assets, which includes crypto. The short-term price drop of the market was triggered by the in-fighting of Bitcoin Cash and Bitcoin Cash SV, but the crippling global economy is said to be one of the major catalysts of the declining momentum of cryptocurrencies.

When Will Crypto Demonstrate Inverse Correlation?

Crypto could become a store of value, like gold, that is used by investors to hedge against the global economy. However, due to a lack of liquidity and infrastructure for retail traders, cryptocurrencies are not capable of operating as a hedging tool for large-scale investors.

As the market develops and the industry grows, better liquidity products will become available for both institutional and retail investors. Only then, crypto could potentially work as an inversely correlated asset to the global financial market.

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Ripple Price Analysis: Break Below $0.2900 Could Speed Up XRP Losses

Key Highlights Ripple price seems to be struggling to clear the $0.3100 resistance area against the US dollar. There is a key bearish trend line formed with resistance at $0.3025 on the hourly chart of the XRP/USD pair (data source from Kraken). The pair could decline heavily if there is a break below the $0.2900 and $0.2880 supports. Ripple price is under pressure against the US Dollar and Bitcoin. XRP/USD failed to move past $0.3100 and now it could decline further towards $0.2650. Ripple Price Analysis There was a decent base formed near $0.2920 in ripple price against the US Dollar. The XRP/USD pair traded higher and broke the $0.3000 resistance area. However, buyers struggled to clear the $0.3090-0.3100 resistance. As a result, the price declined below $0.3020 and the 100 hourly simple moving average. The price retested the $0.2920 support area, which is currently protecting further losses. An initial resistance is the $0.3000 level and the 23.6% Fib retracement level of the recent decline from the $.3090 high to $0.2924 low. The stated $0.3000 level also coincides with the 100 hourly SMA. Above $0.3000, there is a key bearish trend line formed with resistance at $0.3025 on the hourly chart of the XRP/USD pair. The trend line coincides with the 61.8% Fib retracement level of the recent decline from the $.3090 high to $0.2924 low. Therefore, the price is likely to struggle near $0.3000 and $0.3020 if it corrects higher. Above $0.3020, the next key resistance is at $0.3090-0.3100. Looking at the chart, ripple price remains at a risk of a sharp decline if there is a break below the $0.2900-0.2880 support area. The next main support below $0.2800 is near the $0.2650 level where buyers may emerge. Looking at the technical indicators: Hourly MACD – The MACD for XRP/USD is slightly placed in the bearish zone. Hourly RSI (Relative Strength Index) – The RSI for XRP/USD is currently well below the 50 level. Major Support Level – $0.2900 Major Resistance Level – $0.3020 The post Ripple Price Analysis: Break Below $0.2900 Could Speed Up XRP Losses appeared first on NewsBTC.

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