You can hardly forbid President Donald Trump to tweet about the economy and the stock market. There’s even a Bloomberg counter that follows these tweets (here). But with all the delight of the current bull market on the stock market – a bitcoin-like, landslide impact may already be on the doorstep.
The saying “what rises, must sink” is perfectly anchored in the financial markets. It’s more about controlling the lows after the highs. The more pronounced the high, the greater the fall.
Currently it is the longest stock bullet history. The previous record dates back to the 1920s, followed by the Great Depression. If history repeats, then perhaps the notion that Bitcoin is in reverse correlation to the stock market may provide relief.
Is there a new “big depression”?
Edan Yago breaks down in a tweet the last 120 years of stock market bull and bears runs. The Great Depression is well known and understood – but it is often forgotten that it followed an eight-year bull run – the longest in history before the current one.
By 2019, the last bull market has been almost 11 years ago. Many think that this run could come to an end, as there is always talk of a looming recession. Central banks around the world are trying to take measures to contain them, such as quantitative easing.
It has just been announced that Germany has opened the floodgates for negative interest rates – the banks had begun to charge private customers for their savings interest. Starting with the first euro in the account.
Hard to tell if the story will repeat in this case. There were world wars during the transition to the second largest bull run and the largest bear market of the early 20th century. The degree of impending recession, however, was extremely high, with a “everything a bubble” in the narrative occurs.
Bitcoin’s birth after the 2008 financial crisis has led many people to believe that BTC is a hedge against geopolitical tensions and market failure. When the US-China trade war threatened, Bitcoin’s price rose so much that many thought it was a good hedge against this financial turmoil. It also seemed to be linked to a decline in the stock markets.
In fact, there are reports that suggest, “BTC had an almost perfect negative correlation with the S & P 500, underscoring public interest in BTC as a hedge against global markets,” said the SFOX Crypto Market Volatility Report in May 2019.
If there is this negative correlation, plunging world markets into a depressive depression, Bitcoin’s role as a hedge will cement – and the price of the cryptocurrency could rise significantly.