After a very impressive bull run, The Dow Jones Industrial Average has been in a down period for the last few weeks. The cryptocurrency market is also seeing a decline. There could be a connection between the two worlds of investment?
It is important to avoid with vague phrases such as “bull and bear markets” in order to cross-over into every market. The primary reason is that cryptocurrency during it’s phenomenal year 2017 “bull run” saw gains that were more than 10x. If you invested $1,000 in Bitcoin in the beginning of 2017, you’d have achieved well over $10,000 by the close of the year. Stocks investing as a traditional investment hasn’t experienced anything similar to this. In 2017, the Dow rose by 23%..
I’m extremely cautious when reviewing charts and data because I’m aware that you can make the numbers say daily signals whatever you want them to. The same way that crypto saw huge gains in 2017, 2018, also saw a swift correction. What I’m trying to emphasize is that we have to ensure that we are impartial when comparing our results.
Many who are brand new to the crypto world are stunned by the recent price crash. The only thing they’ve heard is that the early adopters were making a fortune and purchasing Lambos. For more experienced traders, this adjustment was quite obvious due to the rising prices in the past two months. Digital currencies have recently led to a lot of people becoming overnight millionaires. It was clear that eventually or not, they’d like to get some of the money from the market.
Another thing I think is something we should be thinking about is the recent introduction to Bitcoin the futures market. Personally, I believe there are a lot of forces in play here, which are led by the traditional guard who would like to see crypto fail. I consider futures trading as well as the enthusiasm surrounding crypto ETFs as a positive step towards making crypto commonplace and being regarded as an “real” investment.
After having said that I started to consider, “What if somehow there IS a connection here?”
What happens if bad news from Wall Street impacted crypto exchanges such as Coinbase or Binance? Would it cause them to drop in that same day? Or what if the reverse was the case and caused the trading signals crypto market to grow since people were seeking an alternative place to store their cash?
In the interest of not trying to influence the numbers, and in order to be as objective as I can I decided to hold off until we had a level playing field. This week’s performance is as good as it gets because it is the an era when both markets were experiencing changes.
If you’re not acquainted with cryptocurrency trading like trading on the stock exchange, cryptocurrency exchanges don’t close. I’ve traded stocks for nearly 20 years, and I’ve experienced the feeling of sitting on an unproductive Sunday afternoon, thinkingabout,
“I really wish I could trade a position or two right now because I know when the markets open the price will change significantly.”
This Walmart-like accessibility can result in knee-jerk emotional reactions that can reverberate in any direction. When it comes to the traditional stock market investors have the chance to press pause and rest their minds on their decisions for a few hours.
To calculate the same amount of data as a one week period, I used the last 7 days of trading data, and the previous five days for the DJIA.
Here’s a side by comparison of the last month (3-3-18 from 3-10-18). This week, the Dow (due for 20 out of 30 businesses comprise losing money) dropped 1330 points, that was 5.21 percentage decrease.
In the case of cryptocurrency, finding an apples-to-apples comparison isn’t as easy because the Dow isn’t a real thing. It is changing however because a lot of organizations are creating their own versions of it. The most accurate comparison at the present moment is to look at the top 30 cryptos in terms of market capitalization.