If we compare Bitcoin with the S&P500 index that concentrates the value of the shares of the 500 most important companies, can you give us an answer?
Bitcoin is a resource that accumulates value that due to its characteristics, should have an inverse correlation relationship with the S&P500 in times of crisis.
We will analyze a graph comparing in which periods it has had a positive correlation and in which it has not.
Let's see
Why this analysis
Many months while bitcoin corrected the price, I read from analysts that there was a negative correlation with the S&P500 because Bitcoin has a positive correlation with gold which is another scarce resource.
But since the great correction of Bitcoin and the S&P500, months ago, I hear that Bitcoin already has a positive correlation with the S&P500 and that we must look at this index to know what the price movement of Bitcoin will be.
Or one thing or the other.
Positive correlation versus negative correlation:
An overview in the field of statistics, the correlation describes as:
"the relationship between two variables. the variables are correlated if the change in one is followed by a change in the other.
The correlation shows whether the relationship is positive or negative (inverse) and how strong the relationship is.
The positive correlation describes the relationship between two variables that change together, while an inverse correlation describes the relationship between two variables that change in opposite directions.
The inverse correlation is sometimes known as a negative correlation, which describes the same type of relationship between variables. "
Key conclusions
There is a positive correlation when two related variables move in the same direction.
An inverse correlation exists when two related variables move in the opposite direction.
Correlation does not necessarily imply causation since other factors may influence direction.
Bitcoin vs S&P500
Sometimes we must review the past to know more about possible price movements in the future.
When was there a negative correlation and when was a positive in the price of Bitcoin with the S&P500?
Analyzing the graph we see one:
Positive Correlation
- Large periods of time in which Bitcoin has cycled upward we see a positive correlation
At the start of a large correction we see a positive correlation between bitcoin and S&P500
Negative Correlation
- When Bitcoin continues in medium-term correction processes we see a negative correlation with the S&P500.
As we saw when defining positive and negative correlation, they do not always have to remain correlated, there may be external factors such as (a long cycle of correction that may influence for a time).
Analyzing the graph of large areas of positive correlation and areas of negative correlation can be explained by long processes of price correction in Bitcoin.
Therefore I am therefore inclined to that bitcoin continues in its history, for now, a positive correlation with the S&P500, the large corrections in S&P500 have been of a positive correlation and impacted on the price of Bitcoin.
Bitcoin behaves as a value accumulation resource?
Throughout its history bitcoin has accumulated value, it has beaten inflation and if we measure in value we could say that the return on investment was excellent, but we must also say that if we compare with the S&P curve, the upward processes Bitcoin price has been given in the context of growth in other markets.
Should Bitcoin detach from its positive correlation with the S&P500?
Being a scarce resource, with decreasing emission over time, it should at some point detach itself from the other markets and mark its growth path, for now the volume of the market seems to be insufficient and manipulable.
And what do you think?
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READ DISCLAIMER: this publication / analysis is only for general information purposes. I am not a professional trader and I will never be a financial advisor. The material in this publication does not constitute any trading advice of any kind. This is the way I see the paintings and what my ideas are.
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