It’s safe to say that the past week was one of the worst for Wall Street and the global financial markets. The S&P 500 marked its quickest correction in history while other major indexes were also bleeding heavily. Bitcoin wasn’t left out, as the cryptocurrency lost a substantial chunk of its value. According to Michael Novogratz, there was a relation between both.
Wall Street’s Meltdown
Global stock markets took a beating in the last ten days of February. The S&P 500 lost about 12 percent since February 19th, marking its quickest correction in history. While the markets are still closed, at the time of this writing, on Friday, February 28th, it marked another decrease of almost 1%.
Other major stock indexes such as the FTSE 100, NASDAQ 100, Nikkei 225, and so forth, are also bleeding out for the given period. Today, however, the Nasdaq futures prices indicate a small increase of about 0.66%, which is a breath of fresh air.
All of this came amid the spread of the new coronavirus called COVID-19. It spread furiously throughout the entire world, starting in China, where the reported cases are around 90,000 with a 6% death rate.
Other seriously affected countries include South Korea and Italy, and there are fears that the virus might start spreading in Western Europe as well. Iran has also reported almost 1,000 cases.
Bitcoin’s Price Follows In Correlation
One of the things that a lot of analysts and members of the cryptocurrency community have been saying about Bitcoin is that it’s not correlated to traditional financial markets. According to former Wall Street hedge fund manager and a popular Bitcoin permabull Mike Novogratz, this isn’t the case this time.
He believes that Bitcoin decline in value because a lot of investors took off their leverage to book some profits amid the notable market crisis.
How did $btc go from being a hedge against bad stuff to getting washed out and trading like a risk asset? When things go from bad, to very very bad like they did last week, investors take leverage down as fast as they can. They book profits to make up for other losses. Ouch.
— Michael Novogratz (@novogratz) March 1, 2020
Indeed, Bitcoin declined severely over the same period as well. Since February 19th, BTC lost about $1,500 of its Dollar-value, marking a steep correction of about 15%.
The cryptocurrency is currently trading at around $8,600. As Cryptopotato recently reported, there could be a move coming in soon, as the price could either test the support at $8,200 or the resistance at $8,800. The outcome of this could dictate where Bitcoin will head next.
On another note, according to another industry expert, Alex Saunders, Bitcoin needs to be completely uncorrelated with other financial assets to grow in the long term.