Bitcoin’s New Found Correlation Puts it in Danger

Various key events coming up this week which would affect the stock market and could spill into the Bitcoin market as well. However, “it would be great to get a washout this week” only to long with a major US stimulus package coming up.

Bitcoin is back to hovering around $9,200 and in red as it continues to follow the S&P 500 but only to the downside.

The Dow Jones Industrial Average and the S&P 500 have had two consecutive weeks of gains while tech shares have been pushing Nasdaq to new highs, during which bitcoin-only ranged.

“It worries me that with how bullish SPX SPY & NDX QQQ are that BTC still cannot spring loose,” noted trader Jonny Moe.

“Equity indices can't go up forever, they will pull back at some point, and given BTC's new-found correlation, I'm cautious that once they do, BTC is going with them,” he added.

Source: Skew

Yesterday, after the S&P 500 briefly touched the highest level since the coronavirus pandemic, the markets tumbled. The main US index stumbled on signs that the coronavirus was throttling the reopening plans in states like California. An increase in tensions between the US and China are also damaging the sentiments.

According to many analysts, the rally has the mega-cap stocks overbought and overvalued. And to confirm that another rally has begun in the broad stock market, it needs to be seen if the S&P 500 has broken the key resistance on the upside.

“The ‘growth’ right now is like a game of musical chairs with 100 players and 3 chairs,” said Adam Crisafulli of Vital Knowledge. “No sentient human could look at some of the super-cap tech stocks and say the latest move wasn’t anything other than a momentum-driven melt-up rally.”

Tesla rallied more than 16% to close over 3% lower. “Tesla is the poster boy of a parabolic move here,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It got really just stretched and overbought and over-crazed in these tech stocks.”

Investors are optimistic, but there’s still a lot of uncertainties. Traders are now awaiting reports from a slew of companies to provide concrete guidance on the impact of the virus.

Some of the key events coming up include the earning season of US banks viz. Goldman Sachs, JPMorgan, Citigroup, Bank of America, BNY Mellon, and Wells Fargo.

Moreover, the Bank of Japan would be taking a policy decision while the European Central Bank is to set monetary policy. The EIA crude oil inventory report is also to be released along with China’s second-quarter GDP – all is coming this week.

Backdrop, however, is also positive with the recovery taking hold, and job data signaling the economy has shifted in a positive direction. More stimulus is also coming.

“Keep the big picture in mind: major US stimulus package coming up by August 7. That's the prize. Need to be positioned heavily long for it,” said economist and trader Alex Kruger. “It would be great to get a washout this week and the next to trade long into the end of the month.”

Bitcoin (BTC) Live Price

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AnTy
AnTy
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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