The phantom of stock market crash is back again to haunt Bitcoin (BTC).
Back then, the possibility of this fast-spreading coronavirus pandemic resulted in lockdowns across emerging and developed markets. Subsequently, international stocks crashed in tandem, also Bitcoin lost half of its value in only two weeks.
Meanwhile, the U.S .dollar index, or DXY, which signifies the greenback's power against a basket of leading international currencies, has climbed by 8.78% to 102.992, its highest level since January 2017.
The huge inverse correlation revealed that investors dumped their stocks and Bitcoin holdings and sought safety in what they thought was a better haven: the greenback.
More than a year after, Bitcoin and stock markets again wrestle with a comparable bearish opinion, this time headed by a renewed requirement for its U.S. dollar after the Federal Reserve's hawkish tone.
Namely, the U.S. central bank declared Wednesday it will begin hiking its benchmark interest rates at the end of 2023, a year sooner than intended.
Lower interest rates helped to pull Bitcoin along with the U.S. stock exchange from their bearish slumber. The grade cryptocurrency jumped from $3,858 at March 2020 to almost $65,000 in April 2021 as the Fed pushed lending rates into the 0%-0.25percent range.
Meanwhile, the S&P 500 index climbed more than 95 percent to 4,257.16 from its mid-March 2020 peak. Dow Jones and Nasdaq rallied similarly, as shown in the chart below.
And this is exactly what happened following the Federal Reserve's rate-hike announcement on Wednesday...
Meanwhile, the U.S. dollar indicator jumped to its two-month large, hinting at a renewed appetite for the greenback in global markets.
3Popular on-chain analyst Willy Woo said on Friday a stock market crash combined with a rising dollar could increase Bitcoin's bearish forecast.
"Some downside risk if stonks tank, lots of rallying from the DXY (USD power ) that is average of money moving to safety," he explained.
Michael Burry, the mind of Scion Asset Management, also sounded the alert on an impending Bitcoin and stock exchange crash, adding that if crypto markets fall out of trillions, or when meme stocks drop out of billions, the Main Street losses will approach the magnitude of nations.
"The problem with crypto, as in many things, is the leverage," he tweeted. "If you do not understand how much leverage is in crypto, you do not understand anything about crypto."
Burry deleted his tweets later.
Some bullish hopes
Regardless of the purchase price activity, Bitcoin's adoption continues to grow, an upside catalyst that was missing during the March 2020 crash.
On Friday, CNBC reported that Goldman Sachs has started trading Bitcoin Futures with Galaxy Digital, a crypto retailer bank headed by former hedge fund tycoon Mike Novogratz. The financial news service claimed that Goldman's telephone to employ Galaxy because its liquidity provider came in response to increasing pressure from its wealthy clients.