Bitcoin and S&P are correlated – that’s the idea that has been once again voiced by the prominent analyst known as Plan B.
The stock-in-flow creator has reiterated that there is a definite correlation between Bitcoin and the stock market, including the S&P 500 index. In a series of tweets, Plan B wrote that based on the current situation in the stock market, BTC which is currently trading at $9,425 should be valued at $18,000, a price last seen on the coin market in 2017.
– #Bitcoin and S&P500 are correlated (95% R2) and cointegrated (so probably not spurious)
– Current S&P level implies BTC $18K (or S&P to go down)
– This is consistent with S2FX model: $288K BTC at S2F56 -> it implies $4300 S&P
– Money printing (QE) pumps both S&P and BTC🚀 pic.twitter.com/0iW8WpEpt1
— PlanB 🔴 (@100trillionUSD) June 17, 2020
He said that the alternative is that the stock market crashed since available data shows that the two markets have a similar pattern.
In the June 17 tweets, Plan B maintained that the two markets also co-integtate being “R Squared” at the 95% value.
Bitcoin and S&P 500: Known Pattern
He cited the March incidence when the price of Bitcoin reacted in tandem with the S&P 500 highlighting its feature as a dependent variable which is highly influenced by movements in the stock market. Bitcoin price fell and then recovered in March, following a pattern seen in the capital market.
Plan B noted that “this is consistent with S2FX model: $288K BTC at S2F56 -> it implies $4300 S&P”, citing that the projected value of Bitcoin was premised on the coins in circulation with respect to existing supply.
Interestingly, stock-in-flow stated that considering that the digital currency has a fixed supply, irrespective of the interest in mining, the coin would be valued $288,000 or more during the next halving in 2024.
Plan B is not the first analyst that has pointed out the Bitcoin-stock market price correlation. The recent tweets came in a week the trend was highlighted. He said that the coronavirus pandemic may be a complicating factor considering interventions by central banks which has inflated supply. He implied that the market is due for correction on account of this. He said correction is due in the next couple of weeks.
This means that macro forces will continue to play a huge role in the coin market in general and the price of Bitcoin in particular.
Plan B had in September last year said that Bitcoin is a correlated asset but maintained that a stress situation would prove how resilient the trend is. The coronavirus pandemic has provided the stress test that has accentuated that position.
He said that the correlation became obvious recently since Bitcoin never correlated with other assets in the past 10 years.
“Bitcoin has been an uncorrelated asset last 10 years, but the real test is a stress situation (recession), which we haven’t had since 2008, but is around the corner.”
He said this is the reason central banks have not created the enabling environment for diversification.
The tweet had more than 1000 likes with comments coming from many followers of Plan B.
Chuks is a blockchain enthusiast and finance researcher that has covered the crypto sphere for several years. He believes that the evolving technology would change how we do business.