Despite a minor correction on Wednesday, bitcoin has been trading at record highs this week and has tripled since the beginning of 2017. The stock market has also posted excellent returns; the S&P 500, for instance, boasts a year-to-date increase of 10.25%.
Commonly, these phenomena have been seen in isolation. Although the cryptocurrency market cap currently exceeds $120 billion, that’s still less than half of the magnitude of SPDR S&P 500 ETF Trust, a mutual fund that regulates $242 billion in funds.
It would seem unthinkable that the crypto markets may have some substantial influence on the stock exchange, at least at present levels. But, Nautilus Investment Research claims to have discovered a correlation between bitcoin cost bull runs and favorable motion at the S&P 500.
Bitcoin and SPX trading together year to date — Bitcoin rate of change acceleration drives SPX returns – https://t.co/Cec4nG9WF2. pic.twitter.com/ETrkwPXTBk
— Nautilus Research (@NautilusCap) August 7, 2017
According to Company Insider UK, Nautilus analyzed bitcoin’s cost history because 2010 and found 18 cases once the bitcoin cost rose 30 percent or more during one month. In 15 of these cases (83 percent), the S&P 500 was greater two weeks later for a mean advantage of 3.61% vs. 2.07 percent in weeks not after a sign. When expanding the study a month, they revealed that the index climbed in 17 cases (94 percent) with an average of 4.66% . 3.06 percent in non-signal months.
This research is fascinating, though it’s still quite a stretch to state that bitcoin has an immediate effect on stock exchange traders. To put it differently, greater risk-taking from the bitcoin markets can indicate that dealers as a whole are starting to abandon a careful investment plan. Considering that the crypto markets are a lot smaller, the disposition manifests itself faster and also to a larger level.
Since bitcoin remains young, there aren’t many data points to test. But it’s going to receive two more. The bitcoin cost issued 30% signs on June 16 and August 7, which means that we are going to have the chance examine the tendency again when next week.
At present, the S&P 500 has increased 1.58% since June 16, making it likely that the two-month results will confirm the correlation.