A common question among those who are investing in crypto markets is this: What will happen if there is a large stock market crash? Will money pour into crypto markets or will crypto markets go down with the stock markets. Many experts in the financial world are calling for a pretty large correction in the stock market to happen relatively soon. There has not been a legitimate correction in the S&P 500 for close to ten years which is unprecedented, so the market is due for a large correction.

To find out what might happen to the crypto markets if this correction happens let’s look at what traditionally happens during a stock market crash. Many people think that investors flock to gold for safety, but this is actually not true if we look at the most recent stock market crash in 2008. At that time gold (a safe haven) declined right along with the stock market. Eventually it started to recover all of its losses as the treasury started printing money and propping up banks. But this shows that investors don’t flock to gold or safe havens.

So why is this? Well, part of the reason is that during a large stock market crash, people start to liquidate assets because of the need to cover their losses, and this includes gold. More people go into cash, so the dollar generally rises during this time. But the liquidation of assets is the biggest reason gold falls. This behavior is often not understood by new investors as they generally don’t have a huge portion of their wealth tied in investments. That’s why the “hodl” meme became so popular, as new crypto investors can simply hold during dips and it doesn’t effect their lifestyle. But long time investors need that capital. And when a huge portion of their money is wiped out in a market correction, they need to start liquidating other assets to make up for the loss.

So how does this effect crypto? Well, if BTC is thought of as a store of value, then BTC will probably fall as people who own it liquidate it the same way they do with gold. This is especially true if BTC is high when the stock market starts to go down. What better time to take profits than when BTC is at its peak and you need money? I think you will see a decent sell off in BTC if this is the case. However, after that, if the stock market does start to recover, money could come into BTC if the returns are faster and bigger than the stock market as people want to make back their money as fast as possible.

So in conclusion, I believe that cryptos will fall in value with the stock market if there is a crash. However, if cryptos can come back faster than the stock market, I think it will attract a large of amount of investors looking to recoup their losses, so cryptos will rise. So either hold during a crash, or if you can time it, get out at the beginning of crash, then buy back in as things settle out. I would suggest you do not start buying cryptos at the beginning of a stock market crash thinking they would rise as the stock market falls.