Bitcoin’s Fall and Its Impact on the Tech Stocks! What is the Connection?

Bitcoin has been taking a beating due to its strong partnership with the stock market

Bitcoin has been conceived a long time ago, and since then it has successfully gained the title of 'digital gold'. Bitcoin is known as the 'digital gold' because it serves as a long-term store of value that would resist broader economic trends and provide a hedge against inflation. But unfortunately, the Bitcoin price is crashing rapidly and has somehow set a foothold as an extremely volatile cryptocurrency which most investors should avoid primarily. The critical condition of the crypto market is one of the major reasons why emerging investors are treating cryptocurrencies as a volatile tech investment. But what is the real reason behind, BTC's falling value?

Experts claim, that since the beginning of 2022, the crypto market has been intensely following the stock market, and a benchmark that is heavily weighted toward is tech stocks. The growing correlation between tech stocks or so to say the stock market, with the crypto market got the investment community quite worried, where several claimed that the decentralized market was not expected to suffer from factors originating in the mainstream economic and financial markets, but currently, everyone is grappling to find solutions and cope up with the present crypto market conditions.

Bitcoin vs Tech Stocks

Bitcoin's performance has been extensively driven by risk assets like tech stocks. Experts believe, that earlier, there was almost zero to little correlation between Bitcoin and other risk assets, but with the growing mainstream adoption of cryptocurrencies in the economic and financial markets, Bitcoin and other altcoins became more and more influenced by the geo-political, economic, and other crises that the ravages the mainstream market. Analysts believe that it is only the aftereffect of getting exposed to the behavior of mainstream investors who are also, now a part of mainstream markets. BTC spiked immensely last year, which triggered several private and institutional buyers to join the market, they hoped to generate profits from their investments but instead found themselves with massive financial losses.

Just like Bitcoin and other cryptocurrencies, tech stocks have also tanked over the past months. The ongoing macroeconomic issues have been responsible for minimizing investors' risk appetite, then inflation occurred to ravage global markets and dominated critical headlines. Based on reports, US inflation soared nearly above 9%, which is a new four-decade high that took place in June 2022, leading the Federal Reserve to increase interest rates, more than once! The Fed's decisions to comply with inflation are also some of the primary reasons why the investors have backed out from buying risker assets.

Is there still a connection between Bitcoin and the Tech Stocks?

Previous reports have denoted that there had been similar trading patterns between Bitcoin and stocks, which is why the crypto market took a major beating. There definitely was a correlation between BTC and stocks, before 2022, but the correlation is much stronger now. Data reveals that in August, the stock market basically performed better than Bitcoin. Currently, at the time of writing this article, the Bitcoin price is revolving around the US$18,000 range, and this is BTC's lowest market value in two weeks. The flagship cryptocurrency is struggling to overtake its critical US$20k resistance, which will mark its journey towards the US$30,000 price range. The markets are being overruled by several factors other than the ongoing economic crises, hence, the current connection between Bitcoin and tech stocks might be a combination of several factors, and it is quite impossible to predict when this partnership will end.