Bitcoin (BTC) and traditional investments, particularly stocks, demonstrated similar chart patterns over the largest part of the past year. Yet, these days, the flagship decentralized finance (DeFi) asset seems a riskier investment compared to the Dow Jones Industrial Average (DJIA).
As it happens, Bitcoin’s risk is currently higher than that of the stock market index of 30 prominent companies listed on stock exchanges in the United States, compared to when they initially matched in the first quarter of 2021, Bloomberg’s senior commodity expert Mike McGlone explained on August 7.
According to McGlone, this may have “bearish implications,” considering that it was “about when Bitcoin first breached $30,000 in January 2021 that it surpassed the Dow, and this level has acted as a pivot since.” Furthermore, he emphasized the difference in volatility at both periods of time:
“Currently resistance, our graphic shows annual Bitcoin volatility at about 3x that of the stock index; it was just below 2x in 1Q21. Unless the addition of a high-volatility asset to a portfolio improves total returns via diversification, there’s typically little incentive to add it.”
Finally, the commodities expert highlighted that the “100-week Bitcoin-to-Dow correlation is about 0.3, close to its historical high” and that the “concern is the stock market may give a normal recession-related decline (…) priced out of most outlooks and pressure Bitcoin,” due to this relationship.
Bitcoin price analysis
As things stand, Bitcoin is currently trading at the price of $28,984, which represents a decline of 0.08% in the last 24 hours, as well as a 1.38% drop across the previous seven days, in addition to losing 4.04% on its monthly chart, as per the most recent information.
All things considered, the recession is going to be a difficult one for Bitcoin, particularly taking into account the fact that the maiden cryptocurrency should be outperforming most risk assets, but it isn’t, as McGlone detailed last week, despite his earlier prognosis of that it would return to the trajectory towards $69,000 reported in April.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
