In the crypto industry, Bitcoin’s meteoric rise to the top of the charts has placed BTC at the center of the market, and right now, there’s one question on the lips of analysts and enthusiasts alike: will Bitcoin price take a plunge in the event that the stock market crashes? Is the halving cycle of Bitcoin string enough to forge ahead of a hypothetical post-COVID economic crisis? Finally, would BTC always be pegged with stocks or is there a light at the end of the tunnel?
This final question is in line with developments in 2009 which saw the United States and Bitcoin unleashing a bull market streak that remains unbroken even in the year 2021. Alongside this record has been rumors of an impending crash and lately, the murmurs have been getting more audible as more people speculate.
This year alone, stocks have been climbing higher and higher as the gloom left by COVID-19 remains, and players in the market are feeling the pressure of these spikes, made all the worse by the unforeseen support of governments towards these developments. For the average observer, a stock market crash is imminent, especially since the required quantitative easing policies are no longer being executed.
This scenario can only be bad for Bitcoin due to the deduced connection between stocks and Bitcoin. The question no one has an answer to is the fate of cryptocurrencies if the rug is pulled out from under U.S equities.
Some of these speculations hold water when measured against events like the June inflation rate in the United States which was distinctly higher than what was expected. Interestingly, the government continued to appropriate debts and hand out bonds even while debts were up to the roof.
Arguments in the favor of the government are that resources were mostly channeled towards pandemic relief efforts. But this does not answer the question of why the government kept stuffing money into the government while stock prices showed that the relief efforts weren’t needed.
Experts conclude that all the funds pumped into the economy are bound to be exhausted at some point, making a huge crash unavoidable. Because markets are getting more and more heat, the chances of an option outside the total crumbling of the market are slim to none.
However, some experts advise against trying to predict the timing of the crash. While stock markets are known for regular declines and the current market is quite overvalued, a downturn, though highly probable should not be predicted hastily.
Why have experts been pondering on the link between the crypto market and the stock market? The recent behavior of BTC is why. With no other explanation for the crash of the crypto market, a lot of people were astonished to note that Bitcoin seemed to mimic stocks in a way. Bitcoin, originally a hedge against other traditional assets is now speculated to crash as well should the stock market crash.
On the other hand, it is also possible for the stock market to crash and send investors running in the direction of the crypto market. For many, this is however a pipe dream as crypto remains infamously volatile as an asset thus making it an unsafe rebound market during financial hiccups.