Is There a Correlation Between The Dow Jones & Cryptocurrency?

Following a rather great bull run The Dow Jones Industrial Average has had a rough few weeks. Cryptocurrency also is undergoing a correction. Could there be a correlation between both investment worlds?

We have to be careful using vague terms such as"bull and bear markets" when crossing into every investment space. The main reason behind this can be that cryptocurrency within the course of its amazing 2017"bull run" saw gains of well over 10x. If you put $1,000 to Bitcoin in the beginning of 2017 you'd have made well over $10,000 at the end of the year. Traditional stock investing has never experienced anything similar to that. In 2017 the Dow increased approximately 23%.

I'm really cautious when reviewing information and graphs because I realize you could make the numbers say what you would like them to say. Just as crypto saw tremendous profits in 2017, 2018 has witnessed an equally quick correction. The point I'm trying to make is that we need to try to be objective in our comparisons.

Many that are new to the cryptocurrency camp are astonished at the recent crash. All they have discovered was how these early adopters were becoming wealthy and purchasing Lambos. To more experienced dealers, this market correction was fairly obvious due to the skyrocketing prices within the last two months. Many digital currencies lately made many people overnight millionaires. It was obvious that sooner or later they would want to take a number of that profit off the table.

Another factor I think we actually must consider is the recent addition of Bitcoin futures trading. Personally, I think that there are major forces at work led by the old guard that want to see crypto neglect. In addition, I see futures trading as well as the excitement round crypto ETFs as positive steps toward creating crypto mainstream and considered a"real" investment.

Having said all this, I began to think,"What if somehow there IS a connection here?"

What if bad news on Wall Street impacted crypto markets such as Coinbase and Binance? Can it cause them to fall on the exact same day? Or what if the opposite were true and it induced crypto to increase since people were looking for another place to park their money?

In the spirit of not trying to skew the numbers and to remain as objective as you can, I needed to wait until we saw a comparatively neutral playing area. This week is all about as good as any as it signifies a time period when both markets saw corrections.

For those not knowledgeable about cryptocurrency trading, unlike the stock exchange, the exchanges never shut. I have traded shares for over 20 Decades and understand all too well that feeling where you are sitting on a lazy Sunday afternoon believing,

"I really wish I could trade a position or two right now because I know when the markets open the price will change significantly."

That Walmart-like availability can also contribute to knee-jerk emotional reactions that may snowball in either way. Together with the traditional stock market individuals have a chance to hit the pause button and sleep on their decisions overnight.

To acquire the equivalent of a one week cycle, I required the previous 7 days of crypto trading data and the previous 5 for the DJIA.

The Dow (due to 20 of the 30 companies that it consists of losing cash ) diminished 1330 points that represented a 5.21% decline.
For cryptocurrencies finding an apples to apples comparison is a little different as a Dow does not technically exist. That is changing though as many groups are producing their own version of this. The nearest comparison at this time is to utilize the top 30 cryptocurrencies concerning overall market cap dimensions.

According to coinmarketcap, 20 of the top 30 coins were down in the past 7 days. Sound familiar? When you have a look at the entire crypto market, the size fell from $445 billion to 422 billion. Bitcoin, seen as the golden standard equivalent, watched a 6.7% decrease during the exact same time period.

What's that we saw nearly similar results? Were there similar motives at play?

While the drop in prices appears to be similar, I believe it is interesting that the motives for this are enormously different. I told you before that amounts can be deceiving so that we actually must pull back the layers.

Here's the Significant news impacting the Dow:

According to USA Today, "Strong pay data sparked fears of coming wage inflation, which intensified worries that the Federal Reserve might need to hike rates more often this year than the three times it had originally signaled."

Since crypto is decentralized it can not be manipulated by rates of interest. That could indicate that in the long run higher prices can lead investors to put their money elsewhere searching for greater returns. That is where crypto might well get involved.

If it was not interest rates, then what caused the crypto correction?

It is mainly because of contradictory news from many nations as to what their stance will be certainly impacts the marketplace. People worldwide are uneasy as to whether countries will even permit them as a legal investment.

The feeling was that if they desired to remove bad players and make sure AML legislation were followed, they wanted to also allow for invention.

It certainly appears that the link in similar results between the two worlds is uncertainty.

We all understand that markets do not like uncertainty. But uncertainty is fleeting. What causes problems one day can at times be resolved overnight. Additionally, there are times when the information is so shocking that it paralyzes the marketplace for several weeks and even years.

The important thing is sifting through all of this information and deciphering what is real and what is not.

Since I am long on both stocks and cryptocurrencies, I feel that maintaining a close watch on both may be quite rewarding. The opportunity for profit exists nearly regular. This is particularly true in crypto as I've often purchased a coin that just fell 30% over the past day and then fell another 30 percent the next, but recovered all of that and much more within a week.

I would recommend staying as diversified as necessary (this varies with every individual's situation). There are days when one is up and another down. For a morale boost, it's wonderful to have the option of logging into the accounts that had the greater day. In case you have accounts in both worlds, then maybe you can relate to this.