Although Bitcoin’s online sentiment is at a two-year low, analysts say that BTC may be on the verge of a breakup.
The global economy doesn’t seem to be in a good place right now, especially with countries like the UK, France and Spain imposing new restrictions across their borders, making the future financial outlook for many local business owners even bleaker.
As for the crypto-economy, on September 21, Bitcoin (BTC) fell almost 6.5% to $10,300 after staying around $11,000 for a few weeks. However, what is interesting to note this time is the fact that the crypto-coin flagship sank in value simultaneously with the gold and the S&P 500.
From a technical point of view, a quick look at the Cboe Volatility Index shows that the implied volatility of the S&P 500 during the above-mentioned time window increased quite dramatically, breaking the $30 mark for the first time in a period of more than two months, leading many commentators to speculate that another March-like crash may be imminent.
It is worth mentioning that the $30 mark serves as an upper threshold for the occurrence of shocking events in the world, such as wars or terrorist attacks. Otherwise, during periods of regular market activity, the indicator remains around $20.
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As for gold, the precious metal has also sunk heavily, reaching its lowest level in two months, while silver has seen its most significant price drop in nine years. This declining interest in gold has led speculators to believe that people are once again turning to the US dollar as a financial refuge, especially as the dollar index has maintained a relatively strong position against other major currencies such as the Japanese yen, Swiss franc and euro.
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Speaking of Europe, the continent as a whole is currently facing a potential economic crisis, and many countries are facing the imminent threat of a severe recession due to uncertain market conditions that have been induced by the COVID-19 scare.
Is there more than meets the eye?
While there has been a definite correlation in the price action of crypto-markets, gold and the S&P 500, Joel Edgerton, chief operating officer of the bitFlyer exchange, noted in a conversation with Cointelegraph that, compared to other assets – such as precious metals, stock options, etc. – crypto-currencies have shown much greater volatility.
In particular, he pointed out that the BTC/USD has been sensitive to the movements of the US dollar, as well as to any discussion related to the possible change of strategy by the Federal Reserve that seeks to stimulate national inflation above the 2% mark. Edgerton added:
„The price movement is primarily driven by institutional business with retail customers who continue to buy the falls and accumulate assets. A key point to watch is the possible effect of the US election and whether that changes the Fed’s response from its current very accommodative stance to a more normal one.
Finally, he said that any change in the US tax code could also have a direct effect on the crypto market, especially since several states, as well as the federal government, continue to seek new tax avenues to offset the stimulus packages that were put together by the Federal Reserve earlier this year.
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Sam Tabar, former CEO of Bank of America’s Asia-Pacific region and co-founder of Fluidity – the company behind the Airswap peer-to-peer trading platform – believes that cryptomoney, as an asset class, remains misunderstood and undervalued: „Over time, people will become increasingly aware of the space of digital assets, and that sophistication will diminish the correlation with traditional markets.