Stocks Vs Cryptos; Trending Charts 2018 Show a Synchronized Dance

We take a look at trending charts for both stocks and cryptos in order to discuss similarities and what they could mean.

Since the meteoric rise of cryptocurrencies from spanning late December to early January,  a market correction has taken full effect and the bears have taken over. Around this same time, stock markets were constantly reaching all-time highs (ATH), not that much different than the all-time highs that had been peaking in the crypto market.  The similarities in the trend and pattern over the past few weeks between both markets have been quite surprising, to say the least.

Below are two charts comparing the E-mini S&P 500 Futures Contract to the MVIS CryptoCompare Digital Asset 10 Index. The former is used as an indicator of overall U.S. stock market performance, while the latter tracks the performance of the top 10 cryptocurrencies by market cap (Images were created on Bloomberg)

 

What you will notice is that both markets have been doing roughly the same thing. Striking, isn’t it? Both markets bottomed out around February 6th and have slowing been building overall momentum ever since despite a stock market plunge a few days ago. The synced drop in both markets signals a correction in what I still believe is an overall bull market for 2018. Corrections are normal, especially when excessive gains and consecutive days, weeks, and months of positive momentum carry cryptocurrencies and stocks to all-time highs. People need to stop creating fear, uncertainty, and doubt (FUD), and take a look at the bigger picture to understand where both markets are headed for 2018.

Why are the stock market and cryptocurrency market moving in tandem? No one can say definitively, but we can speculate. These traditional and digital assets look to be more intertwined with the investment psyche than many originally thought. One plausible cause could be that many people that trade stocks are also trading cryptocurrencies, so they drive identical price action in both markets. FUD in stock markets could be correlated with FUD in crypto markets for all we know, but one thing for sure is that this is far from just a coincidence.

Corrections are good and provide confidence for the overall upward trend in the markets. In the crypto market it is healthy to see corrections given the extremely high gains over the past 3 months. The same could be said for the equity markets.

There may be a few more dips, bumps, and dives along the way, but 2018 is looking to be a big year for cryptocurrencies as we make headway for further market adoption and industry disruption.  At the same time, I think the overall equity markets in the U.S. will continue to boom this year amid the Trump tax reform, a depreciated currency, and overall positive economic growth.

Take a deep long look at the graphs above showing the  coordinated dance between equity markets and cryptocurrencies. Coincidence?  Market manipulation? It’s anyone’s guess. Think deep and I’d love to know your thoughts or any feedback.

Disclaimer: Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.