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4th Largest 1-Month Dow Sell Candle in History Leaves Bitcoin Vulnerable

The Dow Jones Industrial Average closed out Friday’s trading session at 19,000 points, setting a record for the 4th largest single one-month red sell candle in the index’s history. And with Bitcoin recently tightly correlated with the stock market, it could make the cryptocurrency especially vulnerable to another crash. Dow Jones Industrial Average Sets Record for 4th Worst Month on Record The coronavirus and a coming recession have caused a global, market-wide, panic-induced selloff of all assets. The selloff began with the stock market, but later hit cryptocurrencies like Bitcoin, precious metals gold, silver, platinum, and more assets. The Dow Jones Industrial Average was hit among the hardest and has been setting record after record for some of the worst single-day, and one-week losses in the history of the popular United States stock index. Related Reading | Crisis Impact: Most Assets Returned to 2016 Prices While Bitcoin Holds Strong Now, it is the index’s monthly candle may be headed into the history books. This month’s DJI candle is the 4th largest in history, notably beating out the “Great Recession” of 2008. The worst selloff ever recorded occurred in 1929. Some iconic market analysts, such as W.D. Gann believed that the worst economic cycles arrived every 90 years. Doing the math, that could suggest the current selloff could reach similar levels as the sharp, nearly decade-long recession that began in 1929. It took nearly 30 years for the stock market to fully recover and go on to set new highs following the historic collapse. The second worst selloff ever recorded was during a short, but devastating recession in 1987. The third was in the early 1930s before the economy recovered from the collapse of 1929. The coronavirus is a black swan event that already has done significant damage to the economy, and could potentially do far worse compared to back then. Further Stock Market Collapse Could Be Devastating for Bitcoin The continued panic-driven stock market selloff may leave Bitcoin vulnerable to yet another massive crash. It was the stock market selloff reaching a major level that triggered the selloff in cryptocurrencies that recently sent Bitcoin plummeting from $7,500 to a low of $3,800. Related Reading | Bitcoin’s Minute-By-Minute Correlation With Stock Market May Signal Disaster It may be starting to wane, but if the asset continues to show a strong correlation to the stock market, additional downside in stocks could be disaster for Bitcoin – considered an on-risk asset. However, the asset was born during the 2008 recession and features unique attributes that could give it the benefits of an off-risk asset. Only time will tell how Bitcoin will perform in this type of environment. And with inflation on the horizon, it could prove to have value unlike most other assets. Featured image from Shutterstock

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