Bitcoin VS Stocks! (BTC) VS (SPY) Enter The Master's Dojo!
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Kon'nichiwa! Welcome eager warriors, to Master Magic's Dojo! Rise, like the vengeful conquerors that your are, and discover the very essence of what it means to be a master analyst! The ability rests inside of you all. Hone it! Sharpen it! And unleash it on this unsuspecting market! Are you with me, warriors!? ARE YOU WITH ME!? Then bow to your sensei, and let the training begin! Haaaaai-yah!!
Recently, there has been some debate about the relationship between the stock market and cryptocurrencies — a discussion that many of us have been a part of. Now, it's time to assess the two markets, side by side, to truly understand this relationship. So, in today's lesson, we will cover market comparisons, as we search for elusive technical nuances that can impregnate our trading strategies with unprecedented wisdom. Without further ado, let's assess the the relationship between Bitcoin and the stock market, via the S&P 500 (SPY)!
Before you is the four hour BTC chart, with the SPY overlapped (in black.) You can see how the SPY has made a series of peaks and troughs, during it's ascent to the all time high, in a way that is incredibly similar to BTC. On the left side of the chart, there were four primary peaks (blue arcs) that correspond perfectly with one another. From there, we can see that the rallies to the respective all time highs were slightly different. BTC's rally was more parabolic, but there were still some similar subtleties in the peaks and troughs along the way. However, after the all time highs were reached, things got very interesting.
I've taken the liberty of circling each corresponding peak and trough in a different color, to highlight this very clear correlation. Starting from each chart's respective all time high, the circle order is green, red, blue, black, purple, orange, with an extra pink circle on the end of BTC. You can see that BTC posted the all time high on 12/16, while the SPY posted it's all time high on 1/26, more than a month later. From there, each peak and trough continued to be printed by BTC before the corresponding peak or trough was formed on the S&P. Most recently, Bitcoin has fallen dramatically lower, in an move toward a test of it's 2/6 low (red circle.) The current low in BTC is circled in pink, but a comparative low hasn't been created yet on the SPY chart. So, BTC is telling us that we can expect the SPY to head lower, in order to form it's new low (future pink circle.)
You may be wondering why this information is valuable. The reason is because it shows that there IS a correlation between the stock market and cryptocurrency prices. Furthermore, it throws cold water on the idea that a falling stock market could generate relief for cryptocurrencies. For that to happen, we would need to see a divergence of this trend, where the two assets would suddenly begin trading in opposite directions. Currently, there is absolutely no technical indication of that, so there is no reason to believe that there will be a significant rotation of money from the stock market into cryptocurrencies. That is extremely valuable information, especially for crypto investors who may be banking on an influx of money from this top heavy stock market. Another reason why this information is enormously valuable, is because it is another bearish indicator on the S&P500. If you've seen my recent SPY charts, you know that I'm bearish on the stock market. This is another sign that stocks could be set to fall further, and adds even more merit to the short case for stocks. After all, the SPY graph needs a pink circle.
Now that you've had a crash course on comparisons, you can use this method of analysis to better understand the relationships between other markets. It is an invaluable tool, for assessing market relationships and occasionally discovering markets that lead others.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au Revoir!
Recently, there has been some debate about the relationship between the stock market and cryptocurrencies — a discussion that many of us have been a part of. Now, it's time to assess the two markets, side by side, to truly understand this relationship. So, in today's lesson, we will cover market comparisons, as we search for elusive technical nuances that can impregnate our trading strategies with unprecedented wisdom. Without further ado, let's assess the the relationship between Bitcoin and the stock market, via the S&P 500 (SPY)!
Before you is the four hour BTC chart, with the SPY overlapped (in black.) You can see how the SPY has made a series of peaks and troughs, during it's ascent to the all time high, in a way that is incredibly similar to BTC. On the left side of the chart, there were four primary peaks (blue arcs) that correspond perfectly with one another. From there, we can see that the rallies to the respective all time highs were slightly different. BTC's rally was more parabolic, but there were still some similar subtleties in the peaks and troughs along the way. However, after the all time highs were reached, things got very interesting.
I've taken the liberty of circling each corresponding peak and trough in a different color, to highlight this very clear correlation. Starting from each chart's respective all time high, the circle order is green, red, blue, black, purple, orange, with an extra pink circle on the end of BTC. You can see that BTC posted the all time high on 12/16, while the SPY posted it's all time high on 1/26, more than a month later. From there, each peak and trough continued to be printed by BTC before the corresponding peak or trough was formed on the S&P. Most recently, Bitcoin has fallen dramatically lower, in an move toward a test of it's 2/6 low (red circle.) The current low in BTC is circled in pink, but a comparative low hasn't been created yet on the SPY chart. So, BTC is telling us that we can expect the SPY to head lower, in order to form it's new low (future pink circle.)
You may be wondering why this information is valuable. The reason is because it shows that there IS a correlation between the stock market and cryptocurrency prices. Furthermore, it throws cold water on the idea that a falling stock market could generate relief for cryptocurrencies. For that to happen, we would need to see a divergence of this trend, where the two assets would suddenly begin trading in opposite directions. Currently, there is absolutely no technical indication of that, so there is no reason to believe that there will be a significant rotation of money from the stock market into cryptocurrencies. That is extremely valuable information, especially for crypto investors who may be banking on an influx of money from this top heavy stock market. Another reason why this information is enormously valuable, is because it is another bearish indicator on the S&P500. If you've seen my recent SPY charts, you know that I'm bearish on the stock market. This is another sign that stocks could be set to fall further, and adds even more merit to the short case for stocks. After all, the SPY graph needs a pink circle.
Now that you've had a crash course on comparisons, you can use this method of analysis to better understand the relationships between other markets. It is an invaluable tool, for assessing market relationships and occasionally discovering markets that lead others.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au Revoir!
Uwaga
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.*** -Magic loves you-
-JD-
Uwaga
I forgot to circle the peaks after orange, but they exist on both charts. =p
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