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- With out the US inventory market outperforming, the cryptocurrency market would have issue delivering a constructive return in 2023
- S&P 500 leads the cryptocurrency market
- Crypto traders ought to watch US financial information intently
The cryptocurrency market had a robust begin to the buying and selling yr. After affected by a bearish market in 2022, the rally that began in 2023 brings a lot reduction to traders within the cryptocurrency market.
The keenness is comprehensible.
In spite of everything, Bitcoin, the main cryptocurrency, is up +45.93% YTD. Nonetheless, earlier than getting too excited, long-term traders nonetheless take a look at the 1-year losses of -35.62%.
Due to this fact, as soon as once more, timing the markets is essential. These going lengthy crypto at the beginning of 2023 loved a formidable efficiency, whereas people who remained invested for one yr nonetheless benefit from the so-called “crypto winter.”
However why did the crypto market bounce? The reply lies within the chart beneath – due to the US inventory market rally.
S&P 500 chart by TradingView
S&P 500 leads the cryptocurrency market
The chart above exhibits the S&P 500’s efficiency for the reason that high in late 2021. Since then, the principle US inventory market index misplaced -16.36%.
Beneath are the three main cryptocurrencies – Bitcoin, Ethereum, and Ripple. Whereas they peaked a bit earlier, they misplaced between -60% and -70% in worth from their 2021 highs to the 2022 lows.
So the bounce within the cryptocurrency market could look as being in response to traders turning their consideration to the business once more, however as an alternative, it’s all in regards to the US inventory market. The S&P 500 rallied in 2023 too.
Nonetheless, the scale of the 2 actions are totally different due to the distinction between the S&P 500 and the cryptocurrency’s volatility.
In different phrases, given the present context, it’s arduous to see the cryptocurrency market’s rally proceed if the S&P 500 index doesn’t carry out. Therefore, crypto traders ought to care in regards to the US inventory market as a result of the S&P 500 leads the beneficial properties or losses within the cryptocurrency market.