Bitcoin (BTC) does not go up and down on its own. Markets are interconnected and there is a reason for every move up and down. For those of you wondering why Bitcoin (BTC) crashed the past few days, you could look at Bitcoin (BTC)’s historical price action and get some clues. The price of Bitcoin (BTC) did capitulate in a similar manner back in 2015, so it was only reasonable to expect it this time in order for the true bottom to be formed. This is a very plausible explanation in itself if you are looking at Bitcoin (BTC) and the recent crash as an independent event. However, I’d like to propose that it was not an independent event at all.
First of all, let us look at the above weekly chart for S&P 500. You cans see that just like Bitcoin (BTC), the S&P 500 also crashed hard the past few days. It also settled atop a historical trend line same as Bitcoin (BTC). Is this a coincidence? I don’t think so. As much as some people would like to believe that Bitcoin (BTC) is supposed to be digital gold and it has no correlation with the stock market, the fact remains that it has, and a very strong one. The reason behind that is Bitcoin (BTC) is not digital gold, at least not yet. It is a highly speculative asset perhaps even riskier than most emerging market investments. Bitcoin (BTC) goes up only if there is money to put into it. This might sound pretty straightforward but it is not.