The cryptocurrency winter is not allowing Bitcoin (BTC) to move upwards as it saw its biggest drop in three months on Tuesday. Bitcoin fell nearly 10% when the August US Consumer Price Index (CPI) report caught the attention of experts. This creates fear among investors as the Federal Reserve may hike interest rates for the third time this year amid the crypto winter.
S&P 500. correlation with
The price of bitcoin fell in line with the price of the S&P 500 as it fell 4.5% below $4000. Sentiment on Chain Data Analyzer said,
“Following the brutal #CPI report on disappointing inflation news on Tuesday, #Bitcoin fell with the biggest daily drop of #SP500 in two years. Correlation between sectors remains high, and #crypto generally has zero #equity dependency. Thrives best together.”
Bitcoin has been paired with the S&P 500, and is expected to decline further if bitcoin continues to follow the equity markets.
Bitcoin may drop by 20%
The relationship between crypto and tech stocks continues to deepen. The price of bitcoin could drop another 20% to $16,000 after the S&P 500 as it could drop another 2% more as the US equities market opens. Jurian Timmer, Director of Global Macro at Fidelity, commented“If a 14x forward multiple is the correct valuation, simple math will tell us that the fair value of the S&P 500 at EPS of $230 is 3200-3400. This suggests that this bear market is not over yet.”
The Bitcoin Fear and Greed Index slipped from 34/100 to 27/100 as total US stocks fell by $1.6 trillion in one day, more than four times the market capitalization of bitcoin. However, bitcoin is yet to enter the “highly feared” zone, which shows that bitcoin is backed by some investors. Following the fall of the S&P 500, the Dow Jones declined sharply by 3.87% to touch $31,163.99. On the other hand, the tech-heavy Nasdaq fell 3.76% to $61.68.
According to CoinMarketCap, bitcoin fell from $22,814 yesterday to $20,132. Bitcoin is currently trading near $20K with a market cap of $387 billion. This proves once again that reports of inflation have prevented bitcoin from breaking its resistance at $22K, which could be a turning point for BTC.
The stock market has affected the crypto space as Elon Musk-backed Dogecoin was also trading down 5.85% on Tuesday at 6 cents. Ether fell by $7.96% and was trading near $1,586.92, and was down 8.61% at $75.44 on popular crypto exchange Coinbase.