Top crypto asset by market cap, Bitcoin (BTC) has been caught in a sideway trading bout in the past few months.
While Bitcoin has been consolidating between $9,000 and $10,000, it became obvious that both its buyers and sellers have been unable to squash either of these levels leaving investors grappling for clarity. BTC earlier was seen to have underlying strength seem to crumble into an illusion of weakness as BTC trading volumes dwindled.
Interestingly, equities have concurrently being bound within sideways trading as uncertainty met with lack of investors clarity regarding the period the economy will bounce back to its pre-coronavirus stance. In the last few months, it is becoming glaring the coupling between Bitcoin, the firm guide for the cryptomarket and the stocks market, U.S equities in particular.
Over the last few weeks, this correlation between BTC and the stocks market has gotten amazingly stronger spurring up the notion that crypto investors are following the trail of their counterparts in the traditional markets. This supposed “marriage” is bringing up assumptions that BTC will monitor closely the equity market’s trends.
Image Courtesy of Skew
Recently released data from analytics platform Skew noted that the flagship crypto asset, Bitcoin, and U.S equities the S&P 500 have been seeing increased correlation recently. A surge was seen in the coupling levels since the middle of May while it kept on increasing in June.
Bitcoin (BTC) is trading at $9,137, up by 1.50% at the time of this post. A cryptoanalyst is of the notion that the increased correlation between Bitcoin and S&P 500 may cause the first crypto asset to further perpetuate a decline.
Bitcoin (BTC) Near Term Trend May Be Affected by Increased Coupling With S&P 500 Leading Up to a Decline
Alex Krüger, a well-known economist cum cryptoanalyst opined that the correlation between the crypto market and the traditional market could present Bitcoin to a massive decline leading up to some major near-term losses.
Kruger gives the range of the downside movement to be as large as $1,000. this he stated:
“Crypto has been following stocks again in the last few weeks. Charts for large caps look rather bleak. I place higher odds on a BTC 500-1000 down move than on a 500-1000 up move. Reduced long exposure accordingly. I’d be surprised if 9K is not run over in the following few days.”
Another analyst expects a 25% drop in BTC recent prices to trade around $7,000 while a prominent crypto analyst, Tone Vays expects Bitcoin’s consolidation to persist for months.
However, be that as it may, if the economic situation improves and equities market bounce back, this correlation between BTC and stocks market may spur BTC into resuming an uptrend alongside the stocks market.
Image Credit: Skew, Shutterstock