OIL IS RISING, CRYPTO IS DIPPING. WHY?

A ten-year research based on weekly data has shown that there is no direct relationship between Oil and Crypto. So why then do prior occurrences show that oil price spikes are followed by a BTC downward movement? For instance, from January to mid-March this year, Brent crude went from $73 per barrel to $119.50 influenced by the US-Iran-Israel conflict. Bitcoin also had a downswing over that same period from $97,000 to around $65,000. Another one is the 2022 oil shock (from $77 per barrel to $139) influenced by the Russia-Ukraine conflict which we saw a drop in Bitcoin from $44,000 to $38,100.

Even with this, both assets still have no direct long term correlation, but they both respond to similar things like inflation and government actions.
Consumer prices go up when oil price increases, making oil a primary driver of inflation. This influences central bank policy which affects the global liquidity that drives Bitcoin.

It's an identical mechanism but traders should not view crypto-oil relationship as a seesaw by treating Bitcoin as an inflation hedge in real time. Also, where macro drivers or crises try to influence their prices, it is most likely short term. So any positions entered based on such crisis should keep in mind that it basically becomes unsustainable a few months after oil stabilizes.

#OilEdgesHigher