Wall Street sneezed, bitcoin caught a cold

There’s an old saying that when Wall Street sneezes, Europe catches a cold. It probably dates back to the Wall Street crash of 1929 and reflected the fact that the US and European markets were closely linked – even a century ago.

The global nature of the markets means that financial value is interconnected. Broadly speaking, if a large market like America takes a hit, it will be felt elsewhere. ‘Contagion’ impacts other major markets around the world. A few assets are immune, gold being the obvious ‘safe haven’ from financial turmoil.

Until recently, this was true of bitcoin too. Bitcoin was seen as an uncorrelated asset, or even a safe haven. Back in 2013-2016, it saw use as a way of circumventing capital controls imposed by anxious states like China, and therefore typically saw a boost in price when the traditional markets faltered.

Apparently, those days are gone. Part of bitcoin’s mainstreaming process over the last year or so has seen it traded more widely and more professionally, with the first futures markets being introduced. Its movements are no longer uncorrelated to the traditional financial markets. When the Dow Jones tanked yesterday, bitcoin’s own rally failed – part of a picture that analysts have been noting more and more recently. Wall Street sneezed and, like almost everything else, bitcoin caught a cold too.

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