Bitcoin is having a rough time, largely due to the influence of Wall Street. Once considered a revolutionary product in finance, Bitcoin now acts like a regular stock. Bitcoin's price is currently at $63,105, up slightly by 0.3% over the past 24 hours, while the total cryptocurrency market capitalization has also recorded a decrease of 0.4%, down to $2.3 trillion. Bitcoin's daily trading volume has dropped by 41.88%, raising questions about its role as a hedge against risk in traditional markets.
The Relationship Between Bitcoin and the Stock Market
Amid the Bitcoin price decline, US stock indexes have been growing strongly. The S&P 500, Dow Jones and Nasdaq all recorded gains ranging from 1.36% to 1.62%, possibly related to the recent interest rate cut by the US Federal Reserve (Fed). Normally, interest rate cuts stimulate risk assets such as stocks and cryptocurrencies, but the current situation shows a different trend.
One factor worth noting is the rise in institutional adoption of Bitcoin and the launch of spot Bitcoin ETFs, which saw net inflows of $91.99 million on September 20. While Bitcoin typically rises during periods of rising stock prices, the opposite can also happen.
Risks Associated With Wall Street Connections
The increasingly close link between Bitcoin and the stock market carries a number of risks. First is increased volatility; Bitcoin is not only highly volatile, but also prone to overreacting to interest rate cuts. Second, current market sentiment plays a key role, with Bitcoin’s price closely tied to sentiment on Wall Street.
Additionally, broader economic factors are adversely affecting Bitcoin, while regulatory risks also loom large. This connection makes Bitcoin subject to regulation on the stock market.
Ultimately, retail investors could suffer big losses, as they often make decisions based on emotions. If the stock market falls, there is a risk that panic selling could lead to a domino effect that could drive down the price of Bitcoin.
In addition, this link opens up the possibility of market manipulation, as smart money can take advantage of fluctuations between the two markets to adjust prices in their favor.
