Is Bitcoin More Important Than the S&P 500?

Louis Sykes
February 16, 2022

Remember back in the day when crypto was its own thing?

It didn't matter what the Dow, copper, or bonds were up to because Bitcoin and crypto did whatever they wanted.

That ain't the case anymore.

Today's market is entirely different, with far more sophisticated drivers than just a few years ago.

Crypto and risk assets have become heavily correlated. And, in some respects, Bitcoin's really just been somewhat of a beta chase ever since the onset of the pandemic.

Last month, the 30-day correlation between the Nasdaq 100 and Bitcoin was an incredibly positive 0.90. They've traded in lockstep with each other.

So it's fair to say that if you're a crypto trader, it's paid to watch the macro environment.

But let's apply that thinking in reverse.

The perception is that macro drives Bitcoin. But what if Bitcoin drives or at least provide clues to macro, making it the more important analytical tool.

Hear me out.

Crypto is the only market that trades 24 hours, seven days a week.

We're entering a point where institutions can begin managing weekend risk through Bitcoin. The post-CME futures ETF era and the proliferation of Bitcoin derivatives will almost make it a certainty.

If equity futures are going to have a sour open on Monday, you'll likely see it in Bitcoin first. They've traded so closely that you can reliably use it as a universal barometer of risk appetite.

How about commodities or even individual stocks?

We now have cryptos tracking commodities and individual stocks that trade through stock tokens on FTX when they don't trade on weekends.

For the most part, price action in these derivative assets are illiquid and messy when their traditional counterparts are closed.

Still, we could very much see a future where instead of these coins waiting for the big boy's markets to open, they even lead.

There's an extensive discussion of 24/7 stock trading in the Robinhood era. Most are against it, while others see it as an inevitability.

What if it eventually comes, but not in the way we all think?

What if crypto derivatives take over the necessity of traditional platforms and exchanges to implement those changes, like stock and commodity tokens, that become so big and liquid that they front-run traditional assets?

Isn't that the future of 24/7 trading?

So, back to the starting question: Is Bitcoin more important than the S&P 500?

I'll stick my neck out on this one; as a sole equity trader, it very well could be -- if not now, then it most likely will be in coming years.

I think there'll be a ton of edge in using Bitcoin price action as a means to gauge the front-run in risk assets while markets are closed.

That's not only from an analytical perspective but also as a means to more effectively manage risk when old-school markets aren't open for business.

You agree?

Would love to hear your thoughts.

Allstarcharts Team

 

 

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