Bitcoin Stays Stable Amid Historic Stock Market Crash
As U.S. stocks are experiencing their worst two-day sell-off in history, Bitcoin has stayed remarkably resilient. Unchained Director of Market Research Joe Burnett believes this stability might be a re-run of the crypto asset’s initial rebound during the 2020 market crash.
Dow Declines, Bitcoin Rises
On April 4, the Dow Jones Industrial Average dropped over 2,200 points, after a 1,679-point decline the previous day. The 3,800-point drop was the worst two-day decline ever, prompting widespread alarm across financial markets.
But while shares fell, Bitcoin (BTC) increased 2.2% during the same 24 hours. Burnett notes that Bitcoin’s stability amidst such turmoil is in line with how it reacted in March 2020, when it bottomed and recovered well ahead of U.S. stocks.
Bitcoin as a Liquidity Barometer
Burnett described Bitcoin’s volatility as frequently being the reason for it to lead the charge when assets are selling off in panic. However, since the selling in these episodes has usually been swift and nasty, Bitcoin usually bottoms along with it before broader markets.
“Bitcoin hasn’t made new lows since March 11,” Burnett said. “That could be an early sign that the underlying weakness in wider markets might be easing.”
Bearish Sentiment Suggests a Turning Point
Investor sentiment has also reached all-time lows. The AAII investor sentiment survey fell to 19.11% on March 13—the lowest since the COVID-19 pandemic. Historically, low readings like this have tended to coincide with market turning points.
Bitcoin Not Out of Danger
Even with recent gains, Burnett warned against optimism too early. If equity markets continue their precipitous drop, Bitcoin may still be at risk for another slide.
“If equities keep falling hard in the coming weeks, it’s reasonable to assume that Bitcoin might also be in more stress,” he warned.
However, the performance of the crypto asset is the bright spot in an otherwise risky environment.
