Dow Jones Industrial & BitCoin Correlation?


QUESTION: Hi Martin; It is very interesting that both virtual currencies, Dow Jones Industrial Average(US Stock Market) and Bitcoin, topped out on November 29, 2013. I’m not saying that this is the top of the markets, I’m saying the Dow(US Stock Market) is Bitcoin for the Super Rich. I’m saying that they are both are now correlated. Both are being valued as a way of protecting wealth from bail-ins. Therefore, as goes the Dow, so goes Bitcoin. Is the Dow Jones Industrial Average in a bubble? Your answer may correlate to Bitcoin. What do you think?



 ANSWER: Congratulations! You are starting to see the interconnected world. The reason both Bitcoin and the Dow peaked the same day is because human collective behavior is the same regardless of the instrument. Why has the Economic Confidence Model worked so well? Because it was NOT based on a single individual market. It was based upon what you just observed. Humans speculate like clockwork. What they speculate in honestly makes no difference. Some people feel more comfortable with gold. Others stocks, others real estate. They will ALL act for the same reason, to preserve capital. What they invest in depends upon the mood and what they BELIEVE in.

The Goldbugs have taken this so personal that the world is wrong and only gold will survive and they attack anyone who disagrees. Their dream that EVERYONE will buy gold is stupid for it is no different from expecting everyone to vote Republican or Democrat. I am a political-agnostic because I see both sides and yet they agree on one thing – government needs to control society albeit for different reasons.

Both peaked because it is a cycle of human trends, not per se a specific market. So yes, you get these correlations that verify the overall trend. However, Bitcoin is a bubble for its value soared in a Phase Transition that the Dow Jones has not yet accomplished. Keep in mind that the Dow can absorb huge capital where and Bitcoin or even gold cannot.