The Strange Correlation Between Overstock’s Stock and the Bitcoin Price

At a time when it’s hard to find a correlation between cryptocurrencies and just about any other asset class, it may come as a surprise that a fairly public stock would be tracking bitcoin.

However, that’s exactly what appears to be the case with the share price of Overstock.com (OSTK) and the BTC/USD exchange rate. What’s more, it’s not exactly a short-term coincidence at play.

Ever since 2014, the technical price charts between the two assets have developed a striking similarity, one that not only seems to grow stronger as times goes on, but that saw its latest example late last week amidst crypto market turmoil.

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

As Overstock’s operations have expanded (the company now has a dedicated blockchain subsidiary, tZero, which hopes to publicly trade blockchain-based traditional assets in 2018), it seems investors in the U.S. public markets are using it as a proxy for an asset they’re not easily able to acquire exposure to via something like an ETF.

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

Act I: 2013 bubbles burst

Both OSTK and BTC experienced tremendous growth coming into 2014, and both reached a climax and began a steep descent just before the new year.

Their respective crashes developed with a few notable coincidences:

  • The first day Overstock accepted bitcoin payments (01/09/2014) marked the end of the first relief rally, a.k.a “dead cat bounce,” for both bitcoin and OSTK. Both began a more than 50 percent decline hereafter (first white block).
  • In May 2014, both stabilized in a sideways fashion, followed by a minor upswing (second white block).
  • From mid-September to mid-October, both fell more than 20 percent and formed “V” shaped recoveries at the exact same time, give or take a couple days (third white block).
  • The fourth white block features BTC’s official capitulation that took place on Jan. 14, 2018 when price drop more than 30 percent in a single day. Two weeks later, OSTK fell more than 20 percent in a single day.

BTC went on to break its downtrend in June 2015, much earlier than OSTK, but their bear market structures remained very similar…

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