- Italy's constitutional crisis and fears of the nation leaving the euro-zone sent global stocks and the Euro tumbling.
- US bonds, gold and also cryptos gaining, with digital coins finally rebounding.
- There is a case to be made for a total coincidence and also for a correlation.
Italian bond yields suffered the most significant leap since the 90s, at the same time that George Soros "broke the Bank of England." The same Soros warned of a major and imminent financial crisis, listing Italy among other issues. Money fled out of Italy into the safety of German and US bonds. Stocks dropped as fears of an Italian exit of the euro-zone dubbed Italexit, or Italeave spread. There is no euro-zone without Italy. Inconclusive election results in March suddenly turned into a major global crisis.
See more: Italexit: 9 questions and answers to the Italian crisis and potential euro-exit
At the same time, the prices of cryptocurrencies rose. Bitcoin (BTC/USD) jumped above $7,500, Ethereum (ETH/USD) reached a peak above $573, and Ripple (XRP/USD) briefly topped $0.60.
No connection
There is a good case why these movements are NOT correlated. We recently wrote how the price of all three cryptocurrencies might be ready to bottom out just as Goldman Sachs and JP Morgan are preparing to enter the market. That piece came out Friday and the digital assets continued suffering a bit longer before a rebound was seen.
In addition, at least in the case of Bitcoin, our technical expert Tomas Salles showed that buyers are increasing their intensity according to the Directional Movement Index. The picture is more complicated in other cryptocurrencies.
Here is how things looked like before the bounce, when buyers of Bitcoin began increasing their strength:
Another argument against the correlation between the action in stocks and cryptos is unrelated: the worst moments in Italian bonds and the Euro came between an hour or two before the crypto comeback. Later on, it became harder to draw the charts together.
Italeave and the Crypto climb are connected
To take the opposite side, we can begin with the latest point. First came the massive sell-off in Italian bonds, the Euro, and global stocks. And then came the rise in crypto coins. The money did not flow immediately, but the sequence is telling.
Another argument is about the nature of the crisis and the vision of cryptocurrencies. The Italian President rejected a government chosen by representatives elected by the people, in a modern, Western European country. Many see his move as the establishment or the elite defending itself against the freedom and free choice of the people. Or, as a puppet of external forces. This is a crisis of government.
Bitcoin and other cryptos represent a decentralized, democratized system which undermines the establishment. When the establishment is in crisis, alternatives are sought after.
Conclusion
Arguments can be made for both sides. These are still early days. As the crisis unfolds, we will examine the correlation and could reach more explicit conclusions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Polygon joins forces with WSPN to expand stablecoin adoption
WSPN, a stablecoin infrastructure company based in Singapore, has teamed up with Polygon Labs to make its stablecoin, WUSD, more useful in payment and decentralized finance.
Coinbase envisages listing of more meme coins amid regulatory optimism
Donald Trump's expected return to the White House creates excitement in the cryptocurrency sector, especially at Coinbase, the largest US-based crypto exchange. The platform is optimistic that the new administration will focus on regulatory clarity, which could lead to more token listings, including popular meme coins.
Cardano's ADA leaps to 2.5-year high of 90 cents as whale holdings exceed $12B
As Bitcoin (BTC) gets closer to the $100,000 mark for the first time — it crossed $99,000 earlier Friday — capital is rotating into alternative cryptocurrencies, creating a buzz in the broader crypto market.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: Rally expected to continue as BTC nears $100K
Bitcoin (BTC) reached a new all-time high of $99,419, just inches away from the $100K milestone and has rallied over 9% so far this week. This bullish momentum was supported by the rising Bitcoin spot Exchange Traded Funds (ETF), which accounted for over $2.8 billion inflow until Thursday. BlackRock and Grayscale’s recent launch of the Bitcoin ETF options also fueled the rally this week.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.