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As we all know, Bitcoin has now become somewhat relevant to our real economy, because the development of Bitcoin has forced some real economy industries to pay attention to it. Now many people think that Bitcoin is a very high-quality safe-haven asset, but when the US stock market plummeted, was the value of Bitcoin affected? Looking at the past history, in fact, among the mutual influences between Bitcoin and the real economy, the US stock market has the greatest impact on Bitcoin. So why is Bitcoin greatly affected by the US stock market? Let the editor of the currency circle analyze the impact of the US stock market on Bitcoin for everyone.

 Why is Bitcoin greatly affected by the US stock market?

Affected by the new crown epidemic, the US stock market circuit breaker has had a tremendous impact on the trading and market value of Bitcoin. In just one day, it fell from $10,000 to $7,000, $6,000, and $5,000, and finally came to the stage of $4,500; it experienced a 24-hour plunge of 45%! A large number of people who speculated in coins were cut off and suffered heavy losses. Many countries in the world do not actually recognize the actual value of Bitcoin, because Bitcoin is just a virtual currency generated on the Internet and does not have the credibility of the government. For example, our country does not recognize the value of Bitcoin.

Everyone should know that Bitcoin and gold are essentially different. The characteristic of Bitcoin is peer-to-peer transactions. The biggest advantage of this transaction is cross-border trade. Not only that, in the current economic environment, energy prices are rising, liquidity is shrinking, and corporate profits are shrinking, which will affect the market. In this environment, the demand for Bitcoin will naturally decline. Not only that, some industry insiders say that every time market sentiment fluctuates, the performance of cryptocurrencies themselves is usually more intense than traditional markets. After all, mainstream currencies are not recognized in mainstream society, their equity attributes are not strong enough, and the consensus range of monetary attributes is small, which will make Bitcoin more likely to become an asset with higher volatility.

Compared with rising prices, Bitcoin seems to follow the US stock market when it falls. However, over time, the price of Bitcoin will not be affected by the stock market, but by its own fundamentals. Simply put, the turning point of cryptocurrencies can indicate that risk sentiment has changed, which will affect other risky assets.

 Analysis of the impact of US stocks on Bitcoin

Since the outbreak of the new coronavirus, the plunge in US stocks has not only ended the 10-year bull market in US stocks, but has also repeatedly broken the circuit breaker records in 1987 and 2008. The plunge of Bitcoin is passive, not active. In the face of such an epoch-making financial crisis, financial products are no longer a simple seesaw relationship, but the floor under the seesaw is broken, and everyone falls down together, and the bubble is gone together.

The price of Bitcoin is determined by the countless money that buys Bitcoin, and behind these money are investors and families. Of course, Bitcoin cannot be immune. The so-called coordinated reaction is more of a vortex reaction of panic and liquidation. In the first two times of the U.S. stock circuit breaker, Bitcoin showed an oversold, and since the third circuit breaker, Bitcoin's follow-up decline has no longer existed.

The fundamental reason behind the plunge in US stocks may be that investors have doubts and concerns about the sustainability of excess liquidity supporting the financial market. Once inflation expectations rebound sharply and valuations are repaired, long-term US bonds at the highest valuation level in history will change from a small decline (interest rate rebounds by 10-20bp) to a sharp decline (interest rate rebounds by 50-100bp), which is likely to lead to a tightening of real liquidity, and then bring a significant impact on most asset prices in the world: stocks, commodities, gold, including Bitcoin, may be affected and fall, and the risk of a sharp rebound in the US dollar will increase.

The above is the detailed answer of the editor of the currency circle to the question of why Bitcoin is greatly affected by the US stock market. I hope it can help everyone. Through the summary of the above, we can find that sometimes, it seems that the plunge in the US stock market has an impact on Bitcoin, because the price of Bitcoin has also fallen synchronously with the plunge in the US stock market, but in fact, the mechanism of action is very complicated, and the impact of the US stock market on Bitcoin is not so direct. You should know that under normal circumstances, the plunge in U.S. stocks affects the overall environment, and this environment is likely to affect the Bitcoin market, because the factors that affect the changes in the Bitcoin market are also very diverse, so in addition to seeing the market clearly, everyone must also keep a clear head.