Bitcoin’s Price Reacts To President Trump’s Positive COVID-19 Result, Maintains Correlation With US Equity Markets
Bitcoin’s price dropped for the fourth day in a row on Friday following a dip in the US equity markets brought on by President Trump’s positive COVID-19 test.
The currency dropped by as much as 2.1% landing at $10,387. Since then, the coin has regained some ground and at the time of writing is trading hands at $10,550 and is down only 0.28%. The S&P 500 also dropped following the news suggesting that correlation between the leading cryptocurrency and the stock index remains strong, Bloomberg data shows.
The continued correlation in the face of the political news conflicts with the popular narrative that Bitcoin is decoupled from geopolitical events and hurts the argument that the currency is a haven asset. One possible explanation is that those holding both stocks and Bitcoin who are losing out in the equities market could be selling off their Bitcoin to recover losses.
Another leading argument for Bitcoin adoption is that the asset serves as a hedge against inflation as the US government continues to print money to buoy the economy during the COVID-19 pandemic. However, if the correlation between Bitcoin and equities holds up over the long term then a dollar crash would hurt both assets. As always, Bitcoin’s saving grace is its 21 million coin supply cap which supporters expect will allow the currency to continue appreciating in value regardless of what the stock market is doing.
Contributing to Bitcoin’s price downturn over recent days is the news that the US Department of Justice and CFTC charged BitMEX exchange with violating anti-money laundering guidelines. Despite the disappointing news, CEO of crypto investment bank Galaxy Digital Mike Novogratz encouraged followers to buy the Bitcoin dips arguing that crypto is bigger than one exchange. He believes that stimulus deals pushed through by Congress will push investors to inflation-proof assets like Bitcoin or gold.
Others on crypto Twitter have turned to Bitcoin’s ability to maintain its support at $10,000 — despite the negative news including the BitMEX charges and the recent $150 million KuCoin hack — as a sign of the currency’s resilience. One popular crypto commentator wrote in a tweet that if the slew of bad press doesn’t tank the currency then it will soon take off.
By Emily Mason