"There was a risk of the crypto market crashing." Nasdaq has updated its historical high

The index of high-tech companies has reached a record high point. At the same time, bitcoin also became more expensive. What is the high correlation between the quotations of digital money and shares, and why it can lead to a sharp fall in the new type of assets

On Monday, July 6, major U.S. stock indexes show growth of nearly 2%. The nasdaq index of high-tech companies rose by 1.73%, to 10,383.97 points. At the same time, cryptocurrencies also rose in price. For example, the price of bitcoin exceeded $9200 (daily growth of 1.85%), ethereum rate rose by 4.6%, to $236.

In 2020, digital money shows a high correlation with the stock market. For example, in June, the dependence of the price of bitcoin on the index of the S'amp;P 500 reached 90%. Since the beginning of May, the cryptocurrency has been trading in the range of $9,000-10,000. It began to show the greatest relationship with traditional assets during the crisis months.

"In general, trading decisions can now be made based on the behavior of stock indices. In one of the chats of professional traders, where I am, every day someone draws analogies between Nasdaq and bitcoin - it has already returned to normal. But don't forget, things can change at any moment," warned Andrey Podolyan, CEO of Cryptorg.exchange.

The strongest relationship between the cryptocurrency market and traditional assets was evident in March, when a massive sell-off on the stock market took place against the background of the spread of COVID-19. At that time, the index of the S'amp;P 500 for the month fell by a third, to a minimum of 2237.4 points. At the same time, the price of bitcoin fell to $3800.

"Yes, indeed, this year there is a high correlation of leading stock indices and bitcoin. It all started in the spring, when the market was feverish at the height of the pandemic. The assets then showed a simultaneous recovery. Specifically at the moment, bitcoin is trapped in a rather narrow price range and lags behind the American indices that broke through the high, so there is already a certain correlation," Podolyan added.

In July 2020, bitcoin volatility fell to an annual low of 46%. This may be due to two factors. On the one hand, the asset may be in the accumulation phase. This means that after the "silence" will be followed by a sharp increase in the price. On the other hand, low fluctuations in the cryptocurrency exchange rate may be due to the fact that it consolidates below the key long-term resistance level. In this case, there are risks of falling rate.

Also a negative factor may be a high correlation with the Nasdaq, said the executive director of Klopenko Group and venture club ITLeaders Dmitry Ivanov. He reminded that the cryptocurrency shows dependence on the index since 2018, when the CEO of the exchange Aden Friedman said that in the future the platform will start trading digital money. This will happen after the regulation appears and the crypto market matures.

"The correlation with the behavior of the Nasdaq is alarming: it is very similar to the dynamics of the exchange in the period 1998-2002. Then there was the collapse of dotcoms - firms- dummy with a minimum of staff and a blow capitalization. But the big players in the technology industry (Google, Amazon, eBay) then experienced a collapse and went into growth. Judging by the dynamics of the crypto market, this can happen now with digital currencies: small players will be screened, the market will be cleared of garbage, and the big players will survive the fall and go into growth," Ivanov suggested.

He added that now it is possible to try to trade cryptocurrency based on the dynamics of the Nasdaq. But it is very difficult to predict anything.

In 2020, bitcoin showed a high correlation with American stock indices. However, this situation resembles a dot-com bubble, and cryptocurrencies behave like shares of Internet companies. Even if there is a sale in the digital money market, the largest projects will survive, and the industry will be cleaned up, experts say.