Throughout 2020 thus far, Bitcoin has been showing a tight correlation with major stock indexes like the Dow Jones and the S&P 500.
If this continues, and a “fractal of doom” plays out on the Dow Jones, it could spell complete and utter disaster for Bitcoin and the rest of the crypto market as well, potentially causing BTC to drop to nearly $1,000.
The Coronavirus and the Coming Recession Cause Massive Panic Sell0ff
While the cryptocurrency asset class was once often pointed at as an uncorrelated asset class for traditional equities investors to diversify their portfolio with, throughout the year so far, Bitcoin has shown its closest correlation with the stock market yet.
Once the coronavirus was officially dubbed a pandemic by the World Health Organization and the Center for Disease Control and began to spread across the globe, a massive liquidity crisis unfolded as investors scurried to cash out any assets they hold to prepare for the coming storm.
The highly contagious and deadly virus has already shut down travel, businesses, schools, and much more, and essentially frozen the economy in place.
The coming recession, as a result, has investors fleeing their holdings for safer havens like cash or gold.
The stock market took an absolute beating, causing the largest drop since 1987. With Bitcoin and cryptocurrencies showing such correlation, they also suffered a record-breaking drop.
And if a potential fractal on the Dow Jones plays out, Bitcoin and the rest of the crypto market could be in serious trouble.
The Dow Jones Fractal of Doom Could Take Bitcoin to $1,000
Markets and even economies are cyclical. Just as financial markets cycle through bear and bull, economies cycle through periods of prosperity and recession.
According to some of the most iconic market cycle theorists, economies reset every 90 years or so. The last major economic setback was the Great Depression, which started with a massive stock market collapse in 1929, and lasted all throughout the 1930s.
It’s now 90 years later, and the Dow Jones is exhibiting the early signs of a pattern that took place back then, triggering the worst economic depression the world has witnessed.
Fractal of Doom.
Is the sky falling? pic.twitter.com/6HtWwJ5qTY
— Nunya Bizniz (@Pladizow) March 30, 2020
And if this fractal of doom confirms in the Dow, and Bitcoin continues to follow, the first-ever cryptocurrency could be in for a world of hurt.
The Dow Jones would be in for a nearly 80% decline from current levels. A similar drop for Bitcoin would take the price of the cryptocurrency back to just over $1,000 – which eerily coincides with the previous bull market’s cycle top from 2014.
Related Reading | Historic Recurrence: Will Bitcoin Bottom At Its Previous All-Time High?
Many theories point to Bitcoin retracing to that previous top to confirm resistance as support from many years ago. However, such a move would be devastating for crypto investors who already have held through an over two years of a bear market, only to have the asset plummet in value further.
But this is all depending on both Bitcoin staying correlated to the Dow, and for this fractal of doom to confirm.