The fear and greed index of the crypto markets, at the moment, is at 12. Moreover, the stock market index is at all time lows around 5.
Lately, Bitcoin [BTC] price has been strongly correlated with the stock markets, in terms of being a risk asset. The pandemic crisis fear is one of the toughest tests for Bitcoin has a safe-haven asset. At the beginning of the crisis, it exhibited characteristics of risk asset with a flight to liquid safety.
However, investors are looking forward to the decoupling soon as the fear of the pandemic continues to linger.
Moreover, Charles Edwards of Capriole Investments noted that the bottom might be in for now and we can start looking for bounce in asset prices, he tweeted,
Peak fear *may* also be in for now. The Fear and Greed index (now highest value in weeks at 10) suggests the worst fear may be in for the time being.
If this continues to rise, so does the probability of decoupling.
Currently, Gold and Silver are looking positive after the aggressive flock to cash due to the spread of the deadly virus. This is also due to the rise in the supply of FIAT powered by world Governments.
While the demand for US Dollar is still strong, the investors are starting to fear the long-term sustainability of the Quantitative Easing (QE) measures by the Feds. During the times of panic, initially, all assets witness a drop. However, the safe-haven assets start to decouple from equities as the long-term outlook on the economy weakens. It echoes of the crash during 2008-2009.
Willy Woo, leading on-chain crypto analyst, tweeted,
Flight to safety 101:
1) Traders exit risk-on leveraged positions and sit in USD. Retail investors sell to USD for runway (hard times ahead). All assets crash against USD.
2) After peak fear, best assets for hedging the times ahead rise in value (Gold 2008, Gold & BTC 2020)
— Willy Woo (@woonomic) March 23, 2020
While the downtrend in stocks are continuing, Bitcoin is showing strong resistance to the bears around $5800-$6000. The lock-down in the biggest economic sectors of the world project downfall for equities and risk asset.
However, commodities and hard money is likely to as ‘catastrophic insurance policies.’ Veteran trader and charting expert, Peter Brandt tweeted that it protects the user’s against worst case scenarios.
Do you think the decoupling between risk assets and stock markets have begun? Please share your views with us.