As the overall crypto space enters a deeper correction, nearly $250 billion have been eroded from the overall crypto space. Bitcoin (BTC) alone has contributed to over $90 billion in investor wealth erosion.
As of press time, Bitcoin (BTC) is trading 7.5% down at a price of $43,841 and a market cap of $819 billion. Some analysts have been saying that the contagion from China Evergrande Group led to a correction in the global market following a correction in the crypto market.
Following the meeting of the Federal Reserve this week, the global market is likely to remain choppy. Thus, we can estimate a fair bit of volatility and further correction in the crypto space. Speaking to Bloomberg, Jonas Luethy, a sales trader at GlobalBlock, the U.K.-based digital asset broker, said:
“Some have attributed the sudden dip to the currently ongoing Evergrande situation in China which has already caused turmoil in traditional markets. Analysts have suggested a choppy week is ahead, with a potential pullback to as low as US$41,000.”
Bitcoin’s Correlation With Traditional Stock Indices
The BTC performance has been often correlated with the traditional stock indices like the S&P 500 and the Nasdaq 100 as the world’s largest cryptocurrency continues to get more integrated with the global financial markets. As shown in the below charts, Bitcoin’s correlation with the tech-heavy Nasdaq has been consistently positive since theMarch 2020 crash.
However, going ahead, investors must be prepared for volatility. Scott Bauer, chief executive officer at Prosper Trading Academy, believes that the news coming out of China can be negative for the crypto space. He further added:
“On a day like today, where you have the perfect storm, I think people just go to, ‘What can I sell quickest? What do I have access to at 2 in the morning? If they’re holding crypto, which is obviously an around-the-clock market, maybe that’s the first place they look”.
On the other hand, El Salvador jumped in to buy the Bitcoin dip. The country added another 150 Bitcoin to its treasury and now holds 700 BTC in total.