There is an extremely delicate relationship between the currency market and the stock market.

It is also a market that is sought after by capital, and it is also a paradise for speculators. The currency market and the stock market are not only related to each other, but also have an alternative competitive relationship.

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BTC flash crash

Since Monday, BTC has fallen for 2 consecutive days, and the decline of other cryptocurrencies led by ETH is even more appalling. Compared with the decline of BTC in January this year, the decline in the past two days should be regarded as a flash crash.

On January 8, 2021, BTC hit a new high of $41,950, and then fell for 5 consecutive days. The first day saw a small decline, and then fell sharply. On the fourth day, it reached the low point at that time, with a maximum drop of 27.49%. Subsequently, it rebounded slightly, and then dropped to the lowest point of $28,850 10 days later, with a maximum drop of 31.23%.

In the current wave of decline, after BTC rushed to 58,352 US dollars, it fell sharply on the first day, fell again on the second day, and fell again on the second day. The third day is today. After the opening, it still showed a downward trend. The largest drop of 19.48% was achieved within 2 days.

This wave of decline is coming faster and the decline is more obvious.

There may be four reasons that can cause a sharp change in the price of BTC:

The first one: BTC itself has a negative event. For example, at the end of 2018, when BCH and BSV forked in the computing power war, on the one hand, the two sides needed funds for the computing power war, so they sold BTC and caused the price to drop. The so-called decentralization of BTC is a farce. So BTC dropped hugely at the end of 2018. Obviously, there is no negative event in the current BTC.

The second type: As a result of market fluctuations, BTC experienced a crazy rise followed by a crazy fall. However, in January 2020, BTC first rose by $10,000 within half a month, and then rose by $10,000 within seven days, a 100% increase within 21 days. At present, BTC has risen from around US$30,000 to US$58,000. After nearly a month, this increase is not faster than the previous wave, but it is also faster, so the rapid correction after the rapid rise may be nearly One of the reasons for the 2-day BTC flash crash.

The third type: the boss speaks. Before Tesla publicly purchased BTC, when Musk changed his signature to BTC on Twitter, it drove up the price of BTC. However, when Buffett and other big shots expressed their bearishness on BTC, they did not trigger a sudden drop in BTC, so the speeches of big shots should not promote the flash crash of BTC.

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Currency market and stock market

S&P:

On Monday (February 22) and Tuesday (February 23), the S&P index gapped at the opening. The overall trend was down on Monday, but it was on an uptrend on Tuesday.

Nasdaq index:

The performance of the Nasdaq on Monday and Tuesday was similar to that of the S&P, but the Nasdaq fell more on Monday and rebounded less than the S&P on Tuesday.

An article analyzed: "Because Tesla bought a large amount of BTC, and the sharp drop in BTC prices caused Tesla's stock price to fall, so the Nasdaq showed a more obvious decline."

It can be seen that BTC and U.S. stocks fell at the same time on Monday, and U.S. stocks began to pick up on Tuesday, while BTC still did not pick up.

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Fed rate hike

It turned out that the U.S. fund market had expectations for a rate hike, and believed that the rate hike might be brought forward.

Once the Federal Reserve starts to raise interest rates, it means that the release of the dollar will slow down or even stop, so whether it is the US stock market or BTC, the price bubble will end. This should be one of the reasons why both US stocks and BTC have fallen in the past two days.

So why did US stocks start to pick up again after the market opened on Tuesday?

Facing the expectations of the fund market, a few hours ago, the chairman of the Federal Reserve made a statement:

The main content of this article is translated: "Fed Chairman Jerome Powell told Congress on Tuesday that the economy is 'a long way' from the central bank's goals and that policymakers have no plans to raise interest rates or reduce them anytime soon. bond-buying stimulus.

In testimony before the Senate Banking Committee, Powell said: 'The economy is still a long way from our employment and inflation goals, and it will likely be some time before substantial further progress is made. '

While encouraged by Republican lawmakers, Powell has repeatedly declined to weigh President Joe Biden's $1.9 trillion rescue bill, saying the matter was outside the Fed's purview. "

The article in the previous screenshot was published at 3:00 p.m., while the U.S. stock market began to rise continuously at 2:00 p.m. Beijing time.

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First look at three sets of data

First, after Biden took office, he announced a $1.9 trillion economic stimulus plan (water release plan), but this plan has not yet been passed, and the Republicans and Democrats are still negotiating on this matter. The aforementioned Fed chair is also against the plan. According to reports on Wall Street, the plan is likely to be voted on Friday and Saturday this week.

Second, the $1.9 trillion plan has not yet been formally passed, and the Biden administration has proposed an infrastructure plan starting at $3 trillion.

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Interpretation and Analysis

1. There is a possibility of a crazy decline, that is, the bull market is really over, and the market makers no longer wash and protect the market, but directly smash the market.

However, judging from the high debt situation of the US dollar, the US dollar should continue to release water. What's more, the $1.9 trillion plan has not yet been passed, and a new $3 trillion water release plan is in the works. Therefore, there is a high probability that the water release environment will continue, and the rise of BTC has not declined.

What's more, BTC's own upward trend every four years is still there. Since there is no dollar release, BTC may have an upward momentum.

2. We talked about the 1-month US$1.9 trillion economic stimulus plan (water release plan) is about to be passed. Of course, the little bee is not very clear about the process of passing this plan. We can only say that it is possible this Friday and Saturday pass. It may trigger a new round of asset bubbles, including US stocks and currency markets.

In the currency market, we all know that all good news is bad news. Because before the good news appears, the main force of the market must first wash the market and accumulate funds to obtain more bargaining chips.

Therefore, another possibility of BTC's crazy decline is that there is not much time left for the main force, and the main force needs to complete the washing in a short time and then absorb more BTC.

write at the end

write at the end

This round of BTC decline may be due to three reasons: one is the correction force after the rapid rise of BTC; the other is the US fund market, which has expectations for interest rate hikes, so both the US stock and currency markets have fallen; the third is the $1.9 trillion water release plan It is about to pass, wash the dishes before it is good.

Judging from the first reason, BTC has indeed just experienced a rapid rise from $30,000 to $58,000, and the correction has not yet reached the level of January. The last wave of callbacks lasted for half a month, and this wave may continue to drop next week.

From the second reason, the latest speech by the chairman of the Federal Reserve has calmed the mood of the investment market, and the US stock market has begun to recover. BTC may be safer these days.

From the third reason, BTC may start a new round of rise after the approval of the $1.9 trillion plan (possibly this weekend).

On the whole, the next short-term trend of BTC is also difficult to say. Personal subjective analysis: BTC should be relatively stable before this Friday, and see if the 1.9 trillion plan can be officially passed on Friday and Saturday. If it is officially passed, it may rise. If it is still under discussion, it may drop again next week.

However, judging from the situation of US national debt and Biden's monetary policy, it is a high probability event that the US dollar will continue to release water. Combined with the cycle of BTC, there is a high probability that the BTC bull market is still there! Especially after the implementation of the 1.9 trillion water release plan, it will first promote consumption. When funds are gathered from the consumer market to capitalists, there is a high probability that it will continue to promote the stock market and currency market.

Of course, these are just the relatively subjective analysis and speculation of the little bee, and do not constitute investment advice!