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Is There a Correlation Between The Dow Jones & Cryptocurrency?

The Dow Jones Industrial Average has had a nice uptick the last few days. Did the same hold true in the world of cryptocurrency?

Taking a peak at the last 7 days for both can provide us with some indication of whether or not a correlation exists between the two.

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Those in the cryptocurrency camp woke up today to some shocking news. A recent pullback in the majority of cryptocurrency tokens was disturbing to many crypto enthusiasts. To more experienced traders, this market correction was pretty obvious due to the skyrocketing prices over the last two months.

Even with all of the euphoria no market can withstand price increases of up to 400% in such a relatively short span of time. Many digital currencies recently made many folks overnight millionaires. It was obvious that sooner or later they would want to take some of that profit off the table.

According to coinmarketcap.com, every coin in the top 30 was down in the previous 24 hours and 23 of them were down the previous 7 days. For those not familiar with cryptocurrency trading, unlike the stock market, the exchanges never close. I have traded stocks for over 20 years and I know all too well that feeling where you are sitting around on a lazy Sunday afternoon.

“I really wish I could trade a position or two right because I know I won’t have time to get to it in the morning. With cryptocurrency that is not an issue as you can trade any time you want.”

That Walmart-like availability can also lend to knee-jerk emotional reactions that can snowball in either direction. With the traditional stock market people have a chance to hit the pause button and sleep on their decisions overnight.

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Here is a side by side comparison over the past week (6-9-17 to 6-15-17 noon EDT at the time of this writing). The Dow increased from 21,204 to 21,251. This 147 point swing represented a .70% increase. For cryptocurrencies finding an apples to apples comparison is a little different because a Dow doesn’t exist. The closest thing to it would be Bitcoin as it is the original cryptocurrency and is seen as the gold standard. Typically as goes Bitcoin so go the altcoins.

Conversely, over the last 7 days, the price of Bitcoin (BTC) fell $414 from $2,728 down to $2,314 (15.2%). This represents an interesting inverse relationship.

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Because I am long on both stocks and cryptocurrencies, I believe that keeping a close eye on both can be quite rewarding. The opportunity for profit exists nearly everyday. That does not include the options of shorting both worlds either, which you can certainly do as well.

It’s definitely morale boosting to see at least one of the two up every time you log on to your preferred platforms.

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