The price of Brent crude posted its deepest weekly drop in recent months. Yet bitcoin's price barely reacted to the event. Over the week Brent fell by 9%, while the leading cryptocurrency dropped by only 1%. Such a price gap casts doubt on the strength of the link between the market for black gold and digital gold. Many traders and analysts long considered this correlation an immutable market rule.
Some market participants traditionally view cheaper energy as a green light for a subsequent rebound in the crypto market. However, the real intrigue lies in inflation figures, the distribution of positions on exchanges and the behavior of miners themselves.
Why traders link bitcoin's bottom to falling oil
This week the global benchmark Brent fell below the $80-per-barrel level, losing about 9%. At the same time the US benchmark WTI headed lower and settled around $70.
The drop came after the US and Iran agreed to reopen the Strait of Hormuz.
A common view among traders is that after a sharp decline in oil, bitcoin often forms a global bottom. Some expect a new rise in oil prices in the second half of the year due to a possible escalation between Iran and Israel, as well as the anticipated introduction of fees for passage through the Strait of Hormuz. By their calculations, it is precisely this oil rebound that could trigger another wave of bitcoin sell-offs and form the year's low.
The risks of such scenarios cannot be dismissed. Iran has just suspended the 60-day talks with the US — this could again push prices up. But the link between oil and bitcoin is based only on isolated episodes: if you look at the data for the past five years, no tangible correlation is visible here.
Source: BeInCrypto
