The month of August saw digital assets make a solid comeback after almost three months of consolidation and dips. In fact, Bitcoin[1] and Ethereum[2] were the real winners, in spite of the S&P 500 and Nasdaq Composite closing out the month at all-time highs.
‘BTC and ETH v. stocks’ is an old and endless debate, and the correlation between the two over the years has been a rather general narrative now. While dissimilarities between the two classes have been well-noted in the past, a stark correlation between Bitcoin, other cryptocurrencies, and stocks is one narrative that has been overshadowed.
Bitcoin, crypto, and stocks- It’s all related!
The market has been flooded with reports and analyses of how Bitcoin would remain unaffected by the larger market. However, that’s not entirely true. Take the March 2020 price fall, for instance.
Bitcoin and almost every other cryptocurrency felt the brunt of the same. After COVID hit the United States, the stock market had a big correction, and so did gold and Bitcoin. At that time, the SP500 dropped from its previous top by almost 35%.
Source: Ecoinometrics[3]
It is in this context that the findings of a recent Ecoinometrics report[4] should be read.
Since the pandemic began, more than $4 trillion has been added to the Fed’s balance sheet. This is more than they had in the 12 years that followed the 2008 financial crisis. In fact, almost $3 trillion was added to the Fed’s balance sheet in just a few weeks last year.
At the moment, while the figure is just above $4 trillion, it’s still counting.
Source: Ecoinometrics[5]
The bothersome fact here is that this is more than they did in the twelve years that followed
