On March 12th, both Wall Street and the crypto sector plummeted drastically, witnessing a 'Black Thursday' as leading U.S. stock indexes plummeted to unforeseen intraday levels. top cryptocurrencies bitcoin ( BTC ) and ether ( ETH experienced a staggering 50% drop during the same period.
Fast forward a week, the landscape had transformed remarkably.
Although Bitcoin and Ethereum have mirrored U.S. stock trends lately, cryptos blazed the trail on the morning of Thursday, March 19th, as Wall Street mirrored the market with ambitious gains. Will the bullish sentiment sustain?
Leading cryptos showcase remarkable double-digit growth.
On March 19th, both bitcoin Ethereum and Bitcoin soared over 15% in a single day, with Bitcoin hitting past the $6,300 mark and Ethereum touching $140 at a point – a stark contrast to being below $5,000 and $100 just a week ago.
A temporary buying frenzy swept through the upper echelons of the crypto markets too by the time of this report. XRP reached $0.165 mid-day (+12%), Bitcoin Cash climbed to $224 (+23%), emerging as winners. BNB up to $12 (+16.5%), Tezos to $1.69 (+21%), and Chainlink to $2.27 (+18%).
The precise catalyst for this short-lived surge remains ambiguous, though some prevailing narratives could have served as driving factors.
For example, the Trump administration expanded its emergency economic support initiatives amid the pandemic-triggered global financial slump, perhaps offering a temporary reprieve to crypto markets, often aligning with U.S. stocks lately.
What Are We Dealing With?
March 19th marked a prosperous day for both prominent Wall Street indices and the leading crypto assets, as they climbed amid a period of unprecedented correlation correlation between BTC, ETH, and the S&P 500, a major U.S. stock benchmark tracking the country’s top companies.
By March 17th, BTC and ETH achieved unprecedented levels of correlation with the S&P, with BTC-SPY and ETH-SPY correlation coefficients reaching 0.59 and 0.61, respectively.
Correlation measures range from -1 to +1, and these figures suggest a notable alignment between the top two cryptocurrencies and a key U.S. stock index this month.
These figures marked a historic precedent, far surpassing the previous records for BTC-SPY and ETH-SPY correlations at about 0.31 in December 2018, illustrating that March 2020 witnessed nearly double the correlation observed before.
A Good Time for Crypto?
Crypto markets rallied more sharply on March 19th than U.S. stock markets themselves, but what spurred it?
It’s challenging to pinpoint exact causes, yet some crypto enthusiasts are jubilant over governments adopting inflationary measures as a counter to mainstream market volatility.
The debate between deflationary versus inflationary principles is perennial in crypto discussions, but deflationary advocates now stand in the spotlight, as governments, including the U.S. and E.U., resort to emergency monetary strategies, likely triggering volumes of fiat printing.
Perhaps crypto offers an appealing hedge for the moment, perhaps not. Given the current global economic outlook gearing towards a deep recession, it's predictable for main cryptos to fluctuate in the short term but retain intriguing potential down the line.
Put simply, many assets, especially those perceived risky, might sell-off amid global instability. However, assets like BTC and ETH bring unique merits that distinctly differentiate them from conventional tradable options during worldwide financial distress. The path from here remains to be seen.
