Bitcoin has recently dropped to $55,000, following a sharp decline in the U.S. stock market. This downward trend in Bitcoin has triggered widespread losses across the cryptocurrency market, largely driven by negative sentiment tied to Bitcoin's traditionally poor performance in September.
The decline in both Bitcoin and the broader cryptocurrency market is happening alongside significant losses in the U.S. stock market. On Tuesday, the stock market saw a significant drop, resulting in a loss of $1.05 trillion in market value. Particularly, the "Magnificent 7" stocks—Apple, Nvidia, Amazon, Meta, Microsoft, Alphabet, and Tesla—experienced a combined loss of over $550 billion in market capitalization within just 24 hours, according to The Kobeissi Letters.
The cryptocurrency market is following a similar trajectory, with Bitcoin and several other leading cryptocurrencies experiencing daily losses. This trend highlights Bitcoin's growing correlation with traditional stock markets. Unlike earlier periods when Bitcoin was considered a hedge against traditional markets, the influx of institutional investors—especially with the introduction of Bitcoin ETFs—has changed this dynamic.
Bitcoin's recent drop aligns with its historically weak performance in September, which has consistently been the worst month for the cryptocurrency. Historically, Bitcoin has averaged losses of around 4.5% in September, with a median loss of 4.35%, making it the lowest-performing month compared to others.
A similar pattern can be observed in the S&P 500, where September has been the worst-performing month over the past three decades.
This recent decline in Bitcoin's price occurred despite a rise in the supply of stablecoins within the cryptocurrency market, which usually signals bullish trends. According to a CryptoQuant analyst, much of this new capital has yet to be deployed into the market.
"Most of the capital in stablecoins hasn't yet been used to place buying orders, but this potential 'buying power' could enter the market at any moment," the analyst commented. He also suggested that institutional investors might be purchasing digital assets using TWAP (Time-Weighted Average Price) orders or employing algorithms to minimize short-term price impact.
In the meantime, Bitcoin's recent weakness has benefited assets like Meta stocks and gold, putting pressure on Bitcoin's position as the second-best asset in terms of risk-adjusted returns. Additionally, the BTC MVRV Z-Score has turned negative, indicating that bearish sentiment is dominant. If this indicator remains in the red zone for an extended period, it could signal the onset of a bear market.
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