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An uncertain correlation: the title of Overstock and the price of Bitcoin

At a time when it is difficult to find a correlation between cryptocurrencies and virtually any other asset class, it may surprise you that a fairly public stock is tracing bitcoins.

However, this is exactly what appears to be the case of the shares the price of Overstock.com (OSTK) and the BTC / USD exchange rate. Furthermore, it is not exactly a short-term coincidence at stake.

Starting in 2014, the technical price charts between the two businesses have developed a striking resemblance, which not only seems to grow stronger over time, but has seen its latest example at the end of last week amid the market turmoil cryptic.

At the beginning this might seem like a comparison between apples and oranges, but Overstock was actually the first major retailer to accept bitcoin as a form of payment in 2014.

With the expansion of Overstock's activities (the company now has a blockchain subsidiary, tZero, which hopes to publicly exchange traditional blockchain-based assets in 2018), it appears that investors in US public markets use it. as a proxy for an asset they have "It is not easily able to gain exposure through something like an ETF.

In short, in the eyes of traders, it seems that what is good for the bitcoin is positive for the value of Overstock and vice versa.

Act I: the bubbles of 2013 burst

Both OSTK and BTC recorded a tremendous growth in 2014, and both reached a climax and started a steep descent just before the new year.

Their respective arrests have developed with some notable coincidences:

  • The first day Overstock accepted payments with bitcoin (01/09/2014) marked the end of the first rescue rally, a.k.a "dead cat bounce", both for bitcoins and for OSTK. Both have started a decline of more than 50% in the future (the first white block).
  • In May 2014, both stabilized sideways, followed by a minor recovery (second white block).
  • From mid-September to mid-October, both fell more than 20% and formed "V" -shaped recoveries at the same time, giving or employing a couple of days (third white block).
  • The fourth white block presents the official capitulation of BTC which took place on January 14, 2018 when the price fell by more than 30% in one day. Two weeks later, OSTK decreased by more than 20% in a single day.

BTC continued to break its downward trend in June 2015, long before OSTK, but bear market structures remained very similar.

Act II: the bull races of 2017

The correlation becomes a bit more interesting when BTC has finally started a new uptrend over the peak of 2013.

As seen in the chart above, BTC began this uptrend in May 2017, which set the stage for a rise of more than 1,500 percent until the end of the year. OSTK followed suit and broke its bearish trend just a couple of months later, which led to a surge of over 400 percent by the end of the year. year.

Act III: the correlation tightens

In 2018, the correlation became so exact that it could no longer be ignored.

The exact occurrence of the events began after OSTK and BTC ended their run of 2017 in an explosive way. At that time, everyone reached historical highs almost exactly after a month.

Precise correlations:

  • After the bursting of the bubbles, both fell at their first low on the same day, February 6th.
  • Both will go on to experience a rescue rally, both of which peaked on 20 February.
  • The rallies were temporary and in the end they touched again with a few days from each other
  • Last but not least, both prices have fallen to their lowest 2018 prices on the same day, June 28th.

Conclusion

Could it be an elaborate coincidence? Maybe.

However, it is equally likely that Overstock is now seen by investors more as a cryptocurrency company than an online retailer. With few, if any, ways to the world of traditional finance to invest in cryptocurrencies, perhaps investing in OSTK is the way in which Wall Street invests in the wild world of cryptocurrencies …

Revelation: The author retains BTC, AST, REQ, OMG, FUEL, 1st and AMP at the time of writing.

Prices through Shutterstock; Charts through TradingView

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