While Bitcoin endured a correction of more than 50% earlier in 2021, the S&P 500 index hasn't corrected by more than 10% since 2020.
The correlation between cryptocurrencies and the stock market is starting to wane, according to Bloomberg Intelligence.
Commodity strategist Mike McGlone has written a new report setting out what investors should expect if Wall Street suffers a 20% crash.
While Bitcoin endured a correction of more than 50% earlier in 2021 — taking it from $64,000 to $30,000 — McGlone pointed out that the S&P 500 index hasn't corrected by more than 10% since 2020.
And although the last two major bottoms in crypto assets matched up perfectly with equities, the analyst points out that many major coins are now at a price discovery stage. He added:
"What's changed since emphasizes the potential for cryptos to keep appreciating. Bitcoin is well on its way to becoming the global digital reserve, while Ethereum is revolutionizing fintech and gaining status as collateral of the internet."
This doesn't mean that speculative excess doesn't exist in the crypto market right now, with McGlone pointing to the existence of more than 13,000 coins — including memecoins like Dogecoin and SHIBA INU. He warned:
"A cleansing purge is a matter of time."
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What's Next?
Crypto investors are trying to make sense of where Bitcoin and Ether is heading next following Wednesday's bruising pullback from all-time highs. In the event of a stock market correction, McGlone wrote:
"The bottom line is equity prices will probably experience some reversion and cryptos should initially be pulled lower, but we see solidifying underpinnings for Bitcoin and Ethereum to come out ahead."
The Bloomberg analyst added that Bitcoin "is showing comfort" above $60,000 — and its underpinnings could improve further if Tesla's stock price has now peaked. The electric vehicle maker hit 52-week highs of $1,243 earlier this month, but that rally may have been derailed by Elon Musk selling 10% of its shares after being told to by a Twitter poll.
Striking a positive note, McGlone concluded:
"The revolutionary benchmark crypto has survived many scares, notably because of organic adoption around the globe. That Bitcoin is nobody's project or liability also distinguishes it from altcoins, perhaps making it more valuable than gold in a digital world."
